Rates are down, could be time to refinance

By Amanda Taylor, NEWS 9

All the talk about the economy may have you considering refinancing your home. Is it the right move for you?

When the feds cut the rates, mortgage rates also plunged, opening the door for refinancing. Since last September, mortgage rates dropped nearly a point and there's talk of it going even lower.

Perry Duncan has been in the mortgage business for 35 years and here's his test to see if refinancing is the way to go.

"The first question you have to answer is how long do I plan on living in the house," Duncan said.

He said if you're going to move soon, like in the next two years, be cautious. You may not be able to recoup the costs associated with refinancing.

Up front, you have to pay for a new appraisal which could cost about $400 dollars.  Then you'll have to pay closing costs, just as if you were buying a new place. Those costs can be worked into your new mortgage payment.

"No one knows exactly what their plans are, but if your plan is to stay there, the break even is typically 30 to 44 months, so if you say gosh, I'm going to be here at least five years then you can probably cost justify refinancing," Duncan said.

Check out the potential savings. If you're paying 6.6% interest now and you were to refinance today, here's how much you'd save every month:

• On a $250,000, you can save about $122.
• On an $80,000 loan, you'll save about $40.

"If you could save for example $100 a month, it would pay for the electric bill for most consumers," Duncan said.

Before you jump at it, know that you still have to qualify for refinancing and it's tougher now.

Duncan said last year you could qualify if you had a credit score of 590. Now it needs to be at least 620.

You should also make sure you haven't been late on a mortgage payment in the last 12 months. You can still refinance, you'll just need to provide an explanation on why you were late.

Check to see if your current mortgage charges you a payoff penalty and make sure the lender you're dealing with to refinance is up front with all the costs.

"A lot of customers are going to the Internet and they get a rate from the Internet, but they're only getting the rate.  They don't know what other miscellaneous fees are related to that transaction," Duncan said.

If you have a problem Amanda can help you with, call the Consumer Watch Team at 841-9921.