Mortgage Rates Still at All-time Low Levels

Mortgage rates have hovered slightly below 5% for several months now. Several people I know have inquired about whether refinancing is right for them. There is a short article on BankRate.com which lists 6 questions to ask yourself as a starting point for determining whether refinancing is in the cards for you.

1) Do I have equity in my home?

You may or may not know the answer to this question off the top of your head. Often it will depend on when you bought your house and how your local market has performed during the recent real estate slowdown. You can ask your local Realtor for a Comparative Market Analysis (CMA). This is not an appraisal but will give you a good idea of your current home valuation.

2) What is your credit score?

Quick and dirty go on one of the recognized sites for credit scores: Experian, Equifax, FICO. Asking for a credit score WILL NOT hurt your credit rating; applying for credit affects your score.

3) What are your financial goals?

This is very personal: are you trying to pay off your mortgage ahead of retirement? Get money out to pay for college?  With rates this low, borrowers can sometimes maintain the same monthly payment while reducing the term of the loan.

4) How long do you plan on staying in your house to make it worthwhile to pay for the refinancing?

Bankrate has a calculator so you can calculate the payback period.

5) What are your current loan terms?

Borrowers who have an adjustable rate loan should seriously consider switching to a low fixed rate at this time. The specter of inflation is out there and there is no guarantee the Fed can keep rates low over the long term.

6) Do you have a second mortgage or line of credit?

When refinancing, any secondary mortgages will have to be paid off or combined into a larger primary mortgage loan.