Time to Refinance Again?

Over the past few years mortgage rates have been hitting new lows, enticing homeowners into refinancing their loans for a new lower mortgage rate. Just over a year ago, 30 year conforming loan rates were around 5.00% and 15 year conforming rates were around 4.25%. Mortgage rates today on 30 year loans can be found as low as 3.50% and 15 year rates as low as 2.75% - almost half of the previous year's lows.

Is now the time to refinance again to a lower rate? There are a few factors to consider when refinancing. You have to decide if refinancing makes financial sense overall even if you can get a lower interest rate.

The conventional wisdom when refinancing is getting a refi rate at least 1.00% lower than the current rate on your loan. You should also consider how long you're planning on staying in your home.

Loan Type

Purchase Refinance with Cash out Refinance

State

Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware District Of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming

FICO Score

Superior (780-850) Exceptional (760-779) Excellent (740-759) Very Good (720-739) Good (700-719) Above Average (680-699) Average (660-679) Fair (640-659) Need Improvement (620-639) Poor (350-620)

Loan Amount

$

Points

Up to 0 points Up to 0.5 points Up to 1 points Up to 1.5 points Up to 2 points Up to 2.5 points Up to 3 points

LTV

%

Loan Term

 15-Year Fixed  20-Year Fixed  30-Year Fixed  5-Year ARM  7-Year ARM  10-Year ARM

Show Advertiser Disclosure

The lenders whose rates and other terms appear on this chart are ICB's advertising partners. They provide their rate information to our data partner RateUpdate.com. Unless adjusted by the consumer, advertisers are sorted by APR from lowest to highest. For any advertising partners that do not provide their rate they are listed in advertisement display units at the bottom of the chart. Advertising partners may not pay to improve the frequency priority or prominence of their display. The interest rates, annual percentage rates and other terms advertised here are estimates provided by those advertising partners based on the information you entered above and do not bind. Any lender Monthly payment amounts stated do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Although our data partner RateUpdate.com collects the information from the financial institutions themselves, the accuracy of the data cannot be guaranteed. Rates may change without notice and can change intraday. Some of the information contained in the rate tables including but not limited to special marketing notes is provided directly by the lenders. Please verify the rates and offers before applying for a loan with the financial institution themselves. No rate is binding until locked by a lender.

Lender

APR / Rate

Fees / Points

Payment

NMLS #1835285

5.440%

15-Year Fixed

5.250%

$5,000

Includes 0.750 points for $3,000

Lender Fees: $2,000

$3,216 /mo

Next >

NMLS #401822

5.535%

15-Year Fixed

5.250%

$7,500

Includes 0.875 points for $3,500

Lender Fees: $4,000

$3,216 /mo

Next >

NMLS #1025894

5.762%

15-Year Fixed

5.625%

$3,544

Includes 0.711 points for $2,844

Lender Fees: $700

$3,295 /mo

Next >

NMLS #1835285

6.128%

30-Year Fixed

6.000%

$5,500

Includes 0.875 points for $3,500

Lender Fees: $2,000

$2,399 /mo

Next >

NMLS #3030

6.407%

15-Year Fixed

6.250%

$4,000

Includes 1.000 points for $4,000

Lender Fees: $0

$3,430 /mo

Next >

NMLS #1025894

6.590%

30-Year Fixed

6.490%

$4,168

Includes 0.867 points for $3,468

Lender Fees: $700

$2,526 /mo

Next >

NMLS #401822

6.758%

30-Year Fixed

6.625%

$5,495

Includes 0.875 points for $3,500

Lender Fees: $1,995

$2,562 /mo

Next >

NMLS #1835285

6.764%

5-Year ARM

6.625%

$5,780

Includes 0.945 points for $3,780

Lender Fees: $2,000

$2,562 /mo

Next >

NMLS #3030

7.187%

30-Year Fixed

7.125%

$2,500

Includes 0.625 points for $2,500

Lender Fees: $0

$2,695 /mo

Next >

Rate data provided by RateUpdate.com. Displayed by ICB, a division of Mortgage Research Center, NMLS #1907, Equal Housing Opportunity. Payments do not include taxes and insurance premiums. Actual payments will be greater with taxes and insurance included. Rate and product details.

Another important factor to consider is how far you're into paying off your current loan. The longer you have had your current loan the more principal and less interest you're paying each month, this is the amortization process which works like this.

For the first several years when you pay your monthly mortgage most of the payment goes towards reducing the interest on the loan and less goes towards reducing the principal. As each month goes by less of the payment is paid towards interest and more is paid towards principal. In the last several years of a loan most of the payment goes towards principal.

Refinancing basically 'resets' the amortization schedule and most of your payment goes towards interest again since you're starting a new loan. If you just got a loan or have refinanced in the past few years you don't have to worry about the amortization process since most of your payment is still going towards interest.

The costs involved when refinancing can run several thousands of dollars. You can easily see how much money you save each month by refinancing to a lower rate but you should also consider the fees.

When refinancing, figure out how much the closing costs (with points) add up to. Then take that number and divide it by the amount you think you will save on each monthly payment. Here's an example: If your closing costs add up to $3,000, and your monthly savings are going to be $150 a month, it will take you 20 months to break even on the refinance.

In the example above if you plan to stay in the home for more than 20 months it pays to refinance. Besides the costs, refinancing also involves a lot of work on your part like providing the lender all your financial information needed. Just think back to what was involved getting your original loan, not an easy process.

Even if you will save money figure out if it’s worth the hassle. Most of the time it will be because getting a lower rate can save you thousands in interest payments. Better yet, see if you can refinance to a shorter term loan. Instead of refinancing a 30 year to another 30 year refinance to a 15 year loan. The interest rate will be even lower and you’ll save a ton of money in interest plus you’ll own your home in half the time.

You might also start the refinance process and discover you don't have enough equity in your home to refinance or you might have less than 20% equity. Most lenders these days will require you to have at least 20% equity in the home. Even if you find a lender that allows more than 80% financing you'll have to pay private mortgage insurance which might cancel out any savings when refinancing.

Before you rush out and contact lenders figure out if refinancing actually makes financial sense for you.