Should You Bother Refinancing Your Current Mortgage Rate?

November 15, 2011 8 Comments »
Should You Bother Refinancing Your Current Mortgage Rate?

If you don’t mind, let me beat a dead horse.

Mortgage rates are at or near record lows and you could save a ton of money by refinancing.

There. I won’t say it again because I know how cliché and annoying it is to talk about how much money you can save by doing “X.”

The funny thing is I tell my family the same exact thing, though they don’t bother looking into refinancing either.

They bring it up to me here and there, but don’t do much beyond that.

And you can only tell someone something so many times before you give up.

Perhaps this explains why there are millions of homeowners out there with mortgage rates well above current rates that are indeed “refinanceable.”

Don’t Have the Time to Refinance?

But for some reason, they haven’t bothered looking into a refinance. Maybe they don’t have any spare time to do so? Or it could be that the task is seemingly so daunting that they avoid it altogether.

Or maybe they don’t want to deal with a shady mortgage lender or a crusty mortgage broker?

The reasons are probably endless, but it still blows my mind that more homeowners don’t take action, considering “how much money you can save!”

It could just be that it sounds so darn “sleazy” to refinance, given all the negative attention the mortgage industry has received over the past five years.

So, how many homeowners are actually missing out?

Well, a couple months back a company named CoreLogic noted that twenty million borrowers with positive equity, or 53 percent of all “above-water borrowers,” had above market mortgage rates.

They defined an above market mortgage rate as 5.1 percent (or higher), which is more than a percentage point above current rates for the popular 30-year fixed-rate mortgage.

[The refinance rule of thumb.]

Pretty surprising, no? I thought the number was high, considering all the news about the “record low rates” that seems to permeate the airways.

But no, many of us still don’t bother, and instead continue making inflated monthly mortgage payments.

All that said, it doesn’t make sense for everyone to refinance all the time. Like anything else in the world, it can be good or bad, depending on your unique financial situation and future plans.

[When to refinance a mortgage.]

On top of that, it’s a lot more difficult to actually get approved for a refinance these days, so it’s not the slam-dunk it was back during the boom.

See 7 reasons why you can’t refinance your mortgage for more on that.

But if nothing else, you should at least look into refinancing your mortgage. After all, there are few other things you can do in life to save so much money so easily.

Tip: Does refinancing hurt your credit score?

8 Comments

  1. D.E. Thompson November 15, 2011 at 7:08 pm -

    The reason I’m not refinancing is that I have an FHA loan and going from 4.25 to 3.5-3.75 and have a much higher MI doesnt seem to be worth it. Also not being able to the roll the costs into the loan doesn’t help either. I believe that is correct from what Ive read and seen ref FHA refi.

  2. Joe December 30, 2011 at 9:51 pm -

    You can refinance out of your FHA loan and into a conventional loan to avoid the higher mortgage insurance premiums. It’s worth looking into or at least taking the time to do the math.

  3. Robert Snyder January 3, 2012 at 4:16 am -

    D.E.

    Yes the MI these days is higher so reaching a net benefit is difficult at times. I must correct one thing though….you can not roll closing costs into a streamline without and appraisal…however if you have some value in the home then get the appraisal and as long as the closing costs do not put you over 97.75% loan to value, you can roll in the closing costs. Hope this helps!!

  4. Bobby June 23, 2013 at 3:24 pm -

    I bet a lot of people missed the boat on the really low rates, but some may still be able to save money if their rates are 5% or higher. I’m glad I refinanced last month. Now I don’t have to worry about this for a long, long time.

  5. Lizette June 29, 2013 at 6:14 am -

    I waited too long – of course I start shopping once rates rise. That’s what I get for procrastinating…

  6. Domingo June 30, 2013 at 7:35 pm -

    I refinanced to a 30-year fixed at 3.375% before rates increased. Guess I got lucky. I easily could have waited too, but with a rate that low, I figured there wasn’t much upside left.

  7. Andrew Martinez July 6, 2013 at 10:33 pm -

    With the jobs report that came out on 07/05, 30-year fixed rates are nearing 4.750%.

    The increase in mortgage rates over the last 30 days will have an impact on home values as it reduces the purchasing power of potential home buyers.

  8. Curt July 25, 2013 at 10:09 pm -

    I think everyone should at least run the numbers to see if a refinance makes sense. There are so many options, including moving from an ARM to a fixed loan, or from a 30-year to a 15-year loan. Might as well check to see if you can save some money before it’s too late…

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