Ailing Economy's Lower Rates Provide Opportunity to Refinance

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By Ilyce R. Glink and Samuel J. Tamkin

Saturday, February 16, 2008; Page F16

The economy is going through a rough patch, and the stock market is well below its all-time high. Mortgage rates have been dropping since the end of last year.

For homeowners, that can mean only one thing: It's time to think about refinancing your mortgage.

"If you can save on the interest you're paying, then it's time to do a mortgage refinance," said Fred Glick, managing member of US Loans Mortgage, a mortgage broker in Philadelphia.

For some homeowners whose adjustable-rate mortgage interest rates are rising, the low interest rates on 30-year and 15-year fixed-rate mortgages offer an opportunity to refinance into a loan that's a known quantity.

"If you have a mortgage that's going to adjust, it's important to get into a fixed-rate program now," said Emma Butler, a certified mortgage planner with Mobium Mortgage Group in Chicago.

This week, Freddie Mac's weekly survey of mortgage rates found that a 30-year, fixed-rate mortgage averaged 5.72 percent, with fees totaling 0.4 percent. A 15-year, fixed-rate mortgage carried an average rate of 5.25 percent, plus 0.4 percent in fees.

A year ago, 30-year mortgages averaged of 6.3 percent, while the average 15-year mortgage was at 6.03 percent.

So should you refinance now or wait to see if interest rates drop more?

Conventional wisdom used to say that if you could cut two percentage points off your interest rate, you should refinance. But today, with zero-cost refinance options widely available, it may make sense to refinance if you can shave a half-point off the rate without lengthening the loan term.

"If you can save money by doing a mortgage refinance, you should do it," Butler said. "Some clients lately have saved $250 per month by refinancing."

But understand that with a zero-cost refinancing, you won't get the lowest interest rate for your mortgage.

"You can expect to pay an additional quarter percent in the interest rate if you want a zero-cost refinance," said Dick Lepre, a senior loan consultant with Residential Pacific Mortgage in San Francisco.