Time to Refinance the Mortgage Again?

Once again, Alan Greenspan and the Federal Reserve lowered interest rates another 0.50 percentage point in an effort to further stimulate the economy. With this additional rate cut and falling mortgage rates the average homeowner must begin to wonder if it is time to refinance their current mortgage.

In the Pittsburgh area, the average 30-year mortgage rate is approximately 6.0% and the average 15-year mortgage rate is 5.38%. These rates have come down from the average rates in the summer of 2000 of 8.71% for a 30 year and 8.4% on a 15-year mortgage. If you are like me you must begin to ask yourself… is now the time to refinance my home again?

Let’s examine the basics to see if it makes sense in your own particular case. The old belief was that you should refinance when you could lower your rate by two percentage points. However, in the current environment even one percentage point may be worthwhile, providing the expenses and fees are not extreme. Most people who refinance make this decision in order to lower their monthly payments or to maintain the same payment but reduce the number of years left on their current mortgage.

The refinancing process involves the repayment of your original mortgage and the signing of a new loan. In doing so, you will pay most of the same costs as you did in the original mortgage. The average costs for the refinancing of a $100,000 mortgage runs between $3,000 to $6,000. Paying points is a way to pay interest up front in an effort to receive a lower interest rate over the term of the loan.

I expect many of you may have refinanced your home last year and do not want to pay all the closing costs along with fees and title insurance costs again. If you are in this group, you may want to talk to your lending institution about a process that is known as a “modification”. A “modification” is as basic as it sounds; it is an adjustment to the interest rate section of your current mortgage.

For a fee of $500 to $1,000 the lender would rewrite the interest rate of your current mortgage and you would not have to go through the expense of closing costs again, nor would you have to restart your mortgage term back to the 15- or 30-year original term. This is great for you especially in this current rate environment and if you have recently refinanced your mortgage within the last year.

For a fee of $500 to $1,000 the lender would rewrite the interest rate of your current mortgage and you would not have to go through the expense of closing costs again, nor would you have to restart your mortgage term back to the 15- or 30-year original term. This is great for you especially in this current rate environment and if you have recently refinanced your mortgage within the last year.

If you are looking to compare rates on a national or local level, or looking to gain more insight on this topic you may want to visit bankrate.