Rushing to refinance: Is it worth it?

By Maggie Crane, WINK News

Right now 30-year, fixed mortgage rates are at a 37-year low, and that has many people looking to save. While lenders are busy, many people are finding out they don't qualify.

WINK News found out who should refinance and who's better off waiting.

Just six months ago the mortgage rate was 6.3%. As of Tuesday, it's one whole percentage point lower. But before you rush to refinance, we did the math to find out if it's worth it.

Cape Coral homeowner Mike Goldstein hopes to hold onto a few extra dollars this month.

"I owe more on my house than it's worth," he says.

That means he doesn't qualify for today's lower interest rate.

"We've refinanced a couple of times to get cash out, remodel the bathroom, fix a car -- always sensible stuff, but since the bottom has fallen out, everyone's upside down; it's difficult to dig out," Goldstein says.

Mortgage lender Vince Patti says that's all-too common.

 "We've been extra busy with phone calls but because of the upside down market, we're not that busy actually consumating the loans," Patti, vice president of First Capital Lending in Fort Myers, says.

Patti says you might benefit from refinancing if you have equity in your house, you have great credit and you plan to stay in your home a while.

"Typically the payback is about three to four years," Patti says.

Also, make sure the new rate is at least one percentage point lower than your old rate.

Here's how the math breaks down:

Let's say you take out a 30-year, fixed loan for $150,000 a 7% interest rate. That means you pay $875 a month. If you refinance to a 5.5% interest rate, your monthly payment drops to $687.50, which equals a savings of $187.50.

"If you have a $60,000 loan, a 1% change is too small to consider refinancing," Patti says. "If you have a $150,000 to $250,000 loan, jump all over it because it's very, very sound financing."

Don't forget to factor in closing costs to refinance, which run about $3,000. If you save $100 a month, you'll need to stay in your home for 30 months to break even on that cost.

It also pays to do your homework before you start the process to get an idea of your home's current value. Call a local real estate agent, look online at home valuation sites, or even ask your appraiser ahead of time for a ballpark based on your neighborhood.


Source

Don't make a rush decision to get a refinance make sure you have plan it very well.