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Is refinancing always the best strategy?
By Andrea Jares
Star-Telegram Staff Writer

The Mortgage Bankers Association encourages anyone who is considering refinancing to talk to a mortgage lender because a variety of products are available, and there is no one right answer for everyone.

The association's Web site offers several tips:

  In the past, homeowners have had to compare the fees associated with refinancing with the potential savings. Now, many mortgage companies offer low-cost or no-cost refinancing, typically at a little higher rate.

  Without low-cost or no-cost refinancing, the rule of thumb has been that it makes sense to refinance if the new rate is about 2 percentage points below the homeowner's current rate and if the owner plans to stay in the house for at least a couple of years. Otherwise, the refinancing fees may be greater than any savings from the lower interest rate.

  Some homeowners with fixed-rate mortgages may want to look into an adjustable-rate mortgage if they are planning to move in the next few years. These loans typically lock in interest rates that are even lower than the 15-year rate, but the rate moves up or down with the prevailing interest rate after a set amount of time.

  Those who took out adjustable-rate mortgages when the rates were high may want refinance and lock in current low rates with a fixed-rate mortgage.

  The low interest rates are also making 15-year mortgages attractive. It may be possible to refinance at a rate that will keep monthly payments about the same but allow the homeowner to pay off the mortgage years sooner.

  Some homeowners have seen the refinancing boom as an opportunity to get cash out of their house using a home equity loan or home equity line of credit. Those who have been in a house for a long time may have thousands of dollars of equity that they can tap for college tuition or other needs.

  There are many mortgage calculators available online. One at helps homeowners evaluate such factors as costs associated with refinancing, paying points, taking out a home equity loan and the length of the mortgage that is best for a particular situation.

  Lenders encourage anyone to talk to a mortgage lender. Every situation is different, and there are many products available.


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