The Best Time To Refinance? How About Now

Thursday, March 1, 2007

YOUR MONEY The Best Time To Refinance? How About Now (NAPSA)—The time may be ripe for homeowners with a high interest rate or nonfixed-rate mortgages to think about refinancing to lower-cost options. Evenif interest rates don’t rise appreciably as forecast in coming months, the idea of refinancing has plenty of beat-the-clock appeal to homeowners. That’s especially true if you have an adjustable-rate mortgage (ARM) that may inch upward if interest rates begin the expected climb. According to www.Bankof America.com, a refinanced loan simply means the homeowner changes the interest rate or type of loan to lower the monthly payment. But the go or no-go criteria rests on the payback period between what you pay in closing fees and what you save each month. If the period is relatively short, the homeowner would do well to get into the “refi” queue at the bank. But the chance to reduce monthly payments is ample incentive for homeowners. Bob Caruso, a loan servicing executive for Bank of America, says, “If a homeownercan trim monthly payments to a consistent amount and remove the interest rate variables, it really is worth a close look.” Caruso’s rule of thumbis if homeownersare intent on staying in their home some length of time—for example, three to six years—then a refinance makes sense. The longer you intend to stay in your home, the more worthwhile a refi becomes. Readily available online calculators can help your decision. For example, let’s say you pay $1,200 per month on a $100,000 balance to an existing ARM that is ready to The longer you intend to stay in your home, the more worthwhile a refinancing becomes. reset at 7 percent. You could refi- nance at a 6.50 percentrate. Refi- nance calculators at www.bank rate.com show monthly savings of nearly $500 on a refinanced fixed rate mortgage over 30 years. Application and closing fees are estimated at $2,650. The payback period: a scant six months. That’s why owners of ARMsare particularly rewarded byrefinancing. Each upward tick in mortgage interest bumps up the monthly ARM payment. A refinanced mortgage that locks you in a stable, fixed-rate loan is a way to escape any unwelcome surprises in your mortgage payment. There are upsides beyond a lower monthly payment. You may also save on interest payments over the life of the loan. Or, homeowners who’ve amassed equity in their home can channeltherefi- nance savings into home equity loans or lines of credit for any numberofuses, including funding for college education, debt consolidation, travel, home improvementsor other uses.