Refinance Your Mortgage Now

There's still time to take advantage of the lowest home mortgage rates in 30 years

she wanted to delete other lingering bills that were squeezing her budget.

“It would have been hard for me to come up with $4,500 on my own,” says Allen, whose husband died of a brain aneurysm 10 years ago. “I’m a single parent in a one-income household, so had I not been able to refinance, it would’ve been hard for me to stay on top of my current bills. Now, I don’t have to play catch up.”

Allen refinanced the original $154,000 30-year, fixed-rate mortgage at 10.35% interest into a $175,000 20-year, fixed-rate mortgage at 8% interest. Although she signed the original loan agreement in 1999, she didn’t begin making payments until 2001 because the builder experienced significant delays constructing her home. Otis T. Harper II, senior mortgage officer for United National Mortgage Corp. in Easton, Pennsylvania, which issued the loan, says Allen’s refinance was more complicated than most. First, the refinanced loan amount jumped from $154,000 to $162,000 because Allen had to pay a substantial prepayment penalty for paying her initial loan back within 24 months. Harper then rolled the $4,500 in back taxes into the loan, added closing costs, and an additional $3,000 to pay off other personal bills.

Further complicating matters was Allen’s credit rating. “Her credit scores were kind of low,” says Harper, “so we offered her a mortgage credit program, which doesn’t take her credit card history into account. Instead, it looks at how you’ve paid your mortgage. If your mortgage history has no missed payments or payments that were 60 days late, we take that into account as to the kind of interest rate we can offer.”

Perhaps what helped make the loan most possible for Allen was that her house appreciated in value from $175,000 to $225,000. Allen estimates that shaving more than two percentage points off her loan and shortening the payback period from 30 years to 20 years will save her $168,154 over the life of the loan. To help keep her credit rating blemish-free, she has elected to have the $900 biweekly mortgage payments automatically deducted from her checking account. Now, with the outstanding bills eliminated, her goal is to improve her credit rating over the next two years so that she can refinance again to a regular bank loan, which should carry an even lower interest rate than she has now.

“The best part of this experience is that [United National] worked to see which program worked best for me,” says Allen. With her bills paid up-to-date, she says she can now afford to chip in with her mother to send her daughter D’neah, 10, to Sylvan Learning Center for additional tutoring to improve her grades.

If you are considering refinancing your current home mortgage, there are many factors to review before taking action.

EXPLORE OPTIONS WHEN FINDING THE BEST RATE
When you contact your lender, instead of only asking about the current refinancing rate, ask if it offers a “mortgage modification” option. This option can be offered if the lender still holds your mortgage in

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