I was sitting here on my couch and a few minutes ago Alan Gionet from CBS News came on and did a spot on “Is it time to refinance”. He interviewed Anita Padilla, and a few homeowners about this topic.
Alan, deduced you should think about how long you plan on being in your home, and are the fees being rolled into your loan. Now while Alan would never have enough time to truly delve into this subject. He doesn’t have the knowledge either. Afterall, he is just a journalist doing a story. And we all know the media focusing the majority of their time doing stories to scare us.
Anita, who worked on the task force for Colorado’s legislation brought up a couple good points. She mentioned that while the low rates being advertised may sound good, you may be better off with a slightly higher rate where the lender credits you the costs for the lending and title fees. This is called a true no closing cost loan. These fees aren’t added to your balance, nor do you bring them to the closing table. It is covered by the yield paid by the bank to the lender.
She didn’t however, disseminate that assets, income, and appraised value is important for a conventional refinance. While an FHA or VA streamline refinance don’t require asset, income or even appraisals (so equity is irrelevant).
I can tell you after having personally done a news story with Heidi Hemmet on Fox a few years back. They do edit the interviews to what they want us the consumer to hear. My story with Heidi was about the opportunities within buying a foreclosed home.
So while Anita said it makes sense to refinance if you lower your rate by .5%, this all depends on the fees. If you have to roll in your fees and start your term over, it may or may not make sense.
One homeowner they talked to said even as low as rates are he wouldn’t refinance because he is getting closer to paying the house off. Well If you spend 30 minutes with the right mortgage person, you may find you could be 10 years into your loan , and it could make sense to refinance. Why? Because if you are 10 years into a 30 year mortgage and refinance into a 15 year mortgage. You will actually shave 5 years off your loan, and quite possibly end up with the same payment (due to having a lower amount financed in the new 15 year mortgage).
If you are wondering if it makes sense, just ask. I just told someone the other day it didn’t make sense because she was already at 5.25% and was curious how 4.5% would look for her. It was there (the rate) if she wanted to pay 3% discount and $2500 additional fees. Would it make sense for her? NO! But we all have different situations and for the large majority it does make sense, but do your research~