Ruminating on Refinance

Whether it’s to lower your monthly payment, shorten the life of your loan or cash out on some of your equity, with interest rates remaining near record lows, now may be the time to consider a mortgage refinance.

“Rates are at historical lows and the opportunity of them potentially falling lower is probably not worth the risk of them moving higher,” says Cory Martilla of Supreme Lending in Dallas. “As our economy improves, we can expect rates to rise. Most economic professors believe we are bounding around at the bottom of the country’s current economic condition and that, generally speaking, economic conditions will remain or improve in the next two years. If this is the case, rates will rise.”

A low interest rate may be the enticement, but also examine the terms of the loan and how long you plan to remain in your home. A general rule of thumb is that the rate should be at least 1 percent less than your current interest rate, and you should expect to remain in your current home for at least four years from the time you refinance.

Bill Higgins, chief lending officer with ING Direct in Philadelphia, says if you’re committed to rebooting your mortgage, examine any charges associated with the refinance carefully. If you’re going to refinance to lower your mortgage by a quarter of a percentage point but have to pay thousands in closing costs, it’s going to take a while to recoup those costs.

In addition, get a referral from a friend or loved one to a mortgage loan officer/lender who has many years of experience, especially considering all the changes the mortgage industry has undergone in recent years. Gather all your important financials and make sure you’re prequalified by that lender based on your income, credit and assets to ensure a smooth and timely processing of your loan.