Is now a good time to refinance my home?

Posted on January 17, 2009 by Connie Miller 
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Is now a good time to refinance?

I got this question today via email today from a client who I will call Sally. I thought the subject might be of interest to more than one person, so I am posting my answer on this blog. For now, I am leaving the names of the banks and lenders out of the discussion. The point of this thread is what, why and when, not who and where.

Hi Connie,

We’re planning to refinance our house to take advantage of the low rates. I found a broker who quoted me a 30 year fixed at 4.875%. I got the broker’s name from a friend who has found her to be reputable, but the rate almost seems too good to be true, especially when I look at other lenders. With all the housing crisis stuff, I just wanted a second opinion that I’m not getting into something weird. Does that kind of package seem in the ballpark for what you’ve been seeing in your business? Thanks so much for your thoughts.

Sally

Hi Sally: Thanks for checking in and considering me as a resource. Yes, the rates have been very good beginning around Thanksgiving. The rumor is that they are going to continue to improve for purchases but get worse for refinances. So you are very smart to refinance now.

The rate you get is a function of amount financed, your credit score, and your loan to home value ratio, plus other, less important stuff I won’t get into. While I am not 100% up on the universe of loans out there, the best loans this past week seemed to have been just under 5% with no points for conforming rates (Under $417K) for folks with credit scores of 700 or better. Yesterday, Wells Fargo was at 4 3/4 for this type of product (30 year fixed). If the balance you are financing is what is called high balance conforming ($417K to $625,500) expect to pay about 1/2 point higher. Jumbo loans for amounts over that are not as competitive and require a longer explanation. Rates can change multiple times a day so it is not always easy to compare apples to apples when loan shopping.

Some institutions do their own underwriting on some of their own loans in house plus have the authorization to carry other bank loans as well. Even if you are looking at a rate from a specific bank, the channel the loan goes through might affect the rate. Sometimes retail rates beat those offered by the wholesale channel. Sometimes rates favor the other direction. The main point is you are in the ball park of getting the best interest rates out there now, if not THE best. I would say lock in now while you can before the rates go up and don’t waste the time chasing after 1/8 or 1/4 point difference to get the best possible rate out there. If the rates go down a lot again, you can always refinance. But get into one of the great rates now.

So yes, you are doing the right thing and appear to have a very competitive loan. Good luck and let me know if you need anything else.

Best,
Connie

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