Mortgage Refinancing: When is it Your Turn?

By Richard Barrington
LoanPage.com Columnist

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With all the talk about falling mortgage rates, you may be wondering whether refinancing could save you money. Ultimately, you'll want to run the details through a mortgage calculator to find out for sure whether refinancing make sense. However, before you go to all the trouble of researching the particulars, you can use history as a general guide.

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Use History as a General Guide...

If you have a fixed rate mortgage, the relevant piece of history is the year in which you originated your current mortgage. Since mortgage rates vary greatly over time, timing can be a huge factor in whether and when refinancing makes sense.

Current 30-year mortgage rates are down to around 6.42%. This is higher than they were at any time during 2003, 2004, and 2005, so if you originated your mortgage during one of those years, you can pretty much rule out refinancing for the time being. But don't feel bad--this is because you scored a mortgage during a period of some of the lowest rates in history, so you are already ahead of the game.

On the other hand, mortgage rates for all years prior to 2003 averaged higher than 6.42%, so if you originated your mortgage before 2003, there's a good chance refinancing could save you some money.

Finally, during last year and this one, rates have moved sharply even several times a day. It wouldn't hurt to get preapproved for a refinance so you can move quickly, lock and close your loan if rates drop into your range even for a short time.

...and a Mortgage Calculator to Fine Tune

If you think refinancing might make sense, use a mortgage calculator to nail down the details. The advantage of a mortgage calculator is that it can quantify how much you will save, helping you determine whether it's worth the closing costs and the time involved.

Source Freddie Mac

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.

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