the savings over a longer period of time. But if you only plan on living there for two-to-five years, it might make more sense to take the higher rate and payment by financing the closing costs into the loan. Financing those expenses into the mortgage might be particularly worthwhile if the refinanced loan is more than a full percentage point less than the current rate.
USE YOUR GOOD CREDITFOR A BETTER RATE
Borrowers with good credit ratings have the most leverage to bargain for the best rates. Those with credit blemishes, including such obstacles as bankruptcy, can still refinance, but likely at higher rates. Some borrowers with bad credit have options that may allow them to refinance. For example, some lenders allow consumers to obtain home loans or refinance mortgages on the basis of assets rather than credit rating. But because of the increased credit risk, these borrowers should be prepared to pay higher rates.
DON’T GAMBLE THAT RATESWILL FALL FURTHER
There is still time to refinance if you haven’t already. U.S. consumers who have refinanced since 2001 have already reaped $274 billion in interest rate savings alone, says Zandi of Economy.com. But don’t delay. Mortgage rates could move higher in the second half of this year, when many economists predict the economy will improve.
Remember that lenders still have a huge backlog of refinancing traffic so the closing process could take longer. “You should do it now because you don’t want to be on the tail end of that backlog and roll the dice that rates won’t move higher,” says McBride.
If you’re looking to refinance your current mortgage, Otis T. Harper II, senior mortgage officer for United National Mortgage Corp., says it’s best to take a proactive approach. “With mortgage rates so low, you can call any lender and it should have a number of products or programs that you can benefit from.”
There are a number of Websites that can help you find the best rates on refinancing in your area. They typically ask you to fill out an online questionnaire to help determine the type of loan that suits you. Then, within 24 to 48 hours, they promise to provide a list of lenders who are interested in refinancing your mortgage.
- Loanfight.com gives three rate quotes from lenders within 24 hours of filling out a questionnaire.
- Mortgageexpo.com receives quotes from a database of 800 lenders within 24 hours.
- VAresourcecenter.com specializes in veterans’ administration home loans.
- Lendingtree.com offers four rate quotes from top lending institutions, plus offers extensive information on mortgages.