Mortgage Rates, Refinancing, and Everything Real Estate

July 6, 2012

With mortgage rates at record lows, a trending topic is refinancing and strategies for paying (or not paying) off your mortgage.  In today’s show, we highlight some of the pros and cons of the various options for homeowners.

The refi:   Refinancing your mortgage can be a great strategy for lowering your interest rate, lowering your monthly payment, and subsequently building equity in your home faster.  Some things to consider:  closing costs and other fees, how long you plan to be in the home, and what you will do with the extra cash.  Use this calculator to determine whether the savings you will realize from refinancing make sense in relation to the fees and the time you plan to remain in the home.  We also do not recommend refinancing if you are planning to retire soon or if you have already gone through the refinancing process recently.

Paying off your mortgage early:  Paying your mortgage off as quickly as possible is certainly an attractive option for those of us who are averse to debt of any form.  However, once you make those house payments, there is no guarantee that you can easily get that money back if you need it.  According to Forbes, there are even some lenders that charge a prepayment penalty to those overachieving borrowers.  Before piling all of your extra cash into your home, we recommend that you have a sufficient safety net of cash to get you through unforeseen circumstances (such as job loss, etc.).  Check Bankrate.com for the best current interest rates for your cash reserves.

Some final notes:

-If you have not thought about refinancing, now is the time to look into it.  Consider doing a 30 year rather than a 15 since rates are so low right now.  It may be nice to have that flexibility in the future.

-Look into the new HARP 2 program designed to help homeowners who have stayed current on their mortgages but are now underwater.  To qualify, your mortgage must must have been sold by June 1, 2009 to either Fannie Mae or Freddie Mac.  You must be current for the last 6 months with no more than one missed payment during the last 12 months.  Also, you have to own at least 80% of your home’s current value and this must be your first HARP refi.

-The FHA has a streamlined refinancing program that can lower your interest rate with minimal hassle – no verification of income or employment, no credit check or appraisal of your home.

Please share any of your experiences with refinancing below or on our Facebook page.  Have a great weekend, everyone!


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