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When is a good time to refinance?
As I was on my way to work today, a friend of mine called me to take a look at his current mortgage situation and see if he should refinance. He went on to tell me that his wife had heard of people getting crazy low rates and they wanted to look into getting one too. This is the best type of text to get when you are driving to work because it gives you something to do when you get there and it could be a potential sale.
After I reviewed their particulars, it turns out that I wouldn't be able to help them after all. Of course this is bad for me because I miss out on a sale and you would think it is bad for them too because they do not get the lower rate they were looking for. But the realty is, this scenario played out like many of the ones I deal with on daily basis. In the end, it worked out great for all of us. This brings me to the title of my blog for today. When is a good time to refinance?
My friends that called me were right to see if they could cash in on the lowest rates ever and they were smart to call me. The truth is I could have lowered their rate and saved them some money on their monthly payment, but doing so it would have cost them more money in the long run and they would have reset the clock they have on their mortgage insurance. So in the long run, they wouldn't save money at all and there was no benefit to them.
Several scenarios I look at every week play out the same way. We, as consumers, get so caught up in getting the lowest rate that we sometimes forget about the cost associated with getting the low rate and the other factors associated with getting a new loan. This is why it is important to have a trusted loan officer that you can call and ask questions. If the same friends from today would have called about an ad from TV, radio or the internet, or walked into their local bank, then the scenario would have played out very differently. Those loan officers they would get on the phone would be more than happy to lower their rate. But in doing so would have ignored several other key factors in determining if it was the right loan for them.
When you find yourself asking if now a good time to refinance, try doing the following:
Call me 443-745-0479 or ask yourself:
Do I want to save money, or do I want to have my house paid off sooner?
What will be happening in my life in the next 5, 10 or 15 years? Will I need to refinance then?
Do I have an adjustable rate mortgage?
Do I have mortgage insurance?
How much longer will I live here?
How much do I need to save to make it worth while?
While my friends weren't able to reduce their rate from one already in 4% range to one in the 3s, they were able to understand why they couldn't and why not going lower now would cost more in the long run. For me I gained something more important than a sale today, I gained the respect and trust of two friends who I am sure will spread the word about me and who I am positive will call me when they have questions in the future about their mortgage.
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Most people that I know outside of the mortgage industry have never heard of HARP and definately have not heard of HARP II. HARP and HARP II were created to help homeowners who currently have loans on properties that the home is worth less than the mortgage. This is also known as being underwater or upside down. The basics of these loans are the same where HARP and HARPII will allow you to refinance one of these homes as long as you meet their criteria. The man stumbling point so far for many borrowers is that the programs are limited to loans originated and sold to Fannie Mae or Freddie Mac prior to May 31, 2009. This poses a problem for people who refinanced or bought their homes prior to this date and for those who have loans not backed by Fannie or Freddie (subprime loans). 
