To Refinance…or Not to Refinance
April 1st, 2009
Hi Everyone!
Sorry for delay in getting these posts out on Mondays…tax season is busy and so my schedule gets shifted around a bit! This week, I thought I’d delve into the world of refinancing for those of you who might be curious about whether it is worth it or not, given that interest rates are quite low these days.
DISCLAIMER: I am not a mortgage professional, I do not sell mortgages, and I do not get kickbacks from people or banks financing mortgages.
There has been much word out there about help available for those who are being forclosed upon or who are upside down on their mortgages (i.e. they owe more than the property is currently worth). But what about those who have some equity? Is there any saving grace in this economic situation for those of us who fall in this category?
Considering refinancing right now just might be a good idea. Generally, the rule of thumb is if you can go down 1% on your mortgage interest rate (i.e. from 6% to 5%), it’s worth doing the refinance, particularly if you pay no points to get there. It might even make sense if you can shave .75% off your mortgage, depending on your situation.
If you are planning on going this route, here are a few things to keep in mind when shopping around (because, after all, it is shopping!)
- Bankrate.com and lendingtree.com are not the be-all and end-all of mortgage comparisons. Yes, both sites can be useful as a starting point, but I would really encourage you to also take a look at your local banks to see what they have on offer. In our area, I have found that the local banks are offering better rates, clearer explanation of (and lower) closing costs, and have a more friendly, personable attitude toward the mortgage process. Two local banks in my area that I have found to be great are Webster Bank & Savings Bank of Danbury. Webster Bank has an added incentive for customers who have both their mortgage and a bank account w/ them–they shave an extra 1/4% off your mortgage if you have the payment direct debited! That is a great deal.
- Shop around for attorney fees. If your state requires an attorney at closing for your refinance, get recommendations from your mortgage person and call around. The fees can vary widely for a generally straightforward process. So unless you know a particular attorney is really lousy, spending a lot on an attorney is not really necessary. Also, if you live in a town where attorney fees are high because of your zip code, call up some attorneys a couple of towns over and price shop that way. This approach also works for plumbers and electricians!
- Don’t be afraid to negotiate and play the banks off of each other. If you are uncomfortable with this, read (or re-read) the “Ask Ask Ask” chapter of Turbo-Mom’s Guide to build up your courage. After all, the worst that could happen is that someone tells you “no”. And so what? It wasn’t meant to be.
- Try to shave years off your mortgage in the refi if you can. I have come to a “meeting of the minds” with Dave Ramsey’s approach. Getting rid of your debt sooner rather than later (including your mortgage) is a healthy thing. Yes, if you pay off your mortgage you lose that tax deduction. But on the flip side, you have that much more income in your pocket–and you are saving yourself a boatload of interest!
Any good mortgage (or refi) stories/tips are welcome!
Copyright 2008-2009 Kristin Delfau, author of Turbo-Mom's Guide to Saving Money Without Wasting Time a womens' personal finance book, and Aji Publishing.
Tags: mortgages, refinancing, saving money
Posted in
Turbo-Mom's Guide to Saving Money Without Wasting Time |
No Comments »
