Refi: A Second Chance to Refi

Looking to do a Refi? Mortgage rates are down this past week, after a sharp rise in rates the past couple of weeks, opening a window for many that thought the opportunity to do a mortgage refinance was over.

Rates have come down somewhat from their recent high and are still low compared to historical mortgage rates so doing a home mortgage refinance is still possible for many.

The week of May 18, 2009 one could have locked in a mortgage refinance rate at 4.84 percent for a fixed rate conforming 30 year mortgage. Today’s mortgage rates are higher, a conforming 30 year fixed mortgage is now at 5.65%. If you’re looking to refi a jumbo mortgage, rates are higher than conforming refi loan rates, today’s jumbo refinance rate is at 6.39 percent, up from the May 18 low of 6.12 percent but down from last week’s rate of 6.45 percent.

If you refinanced a mortgage in the past several years and think refinancing again doesn’t make financial sense you should use a mortgage refinance calculator and crunch the numbers. One usually refinances a mortgage when the interest rate you are paying now is at least one percent higher than the current mortgage rate you are paying.

The cost of doing a refi you also have to consider the closing costs on the refi. Mortgage closing costs will be just as expensive as when you buy a home. Costs can include, a title search, attorney fees, an appraisal fee and many other fees that overall can add up to several thousands of dollars.

Many people who try to refinance are finding out they can’t because the house has decreased in value. Banks will not allow you to refinance if you owe more than 80% of the value of your home. This is called the loan to value ratio.

Example: You currently owe $300,000 on your home loan. You purchased your home at the height of the housing bubble at $400,000. You decide the current rate you are paying on your mortgage is 1.5 percent higher than the refinance rate you can get today. You start the refi process, a home appraisal is done and find out the value of your home has decreased 20 percent to $320,000. Although the value of your home is more than you owe, the loan-to-value ratio is 93.75 percent. Making you uneligible for a home refinance.

You won’t find a bank to refinance your home loan in this example but if your current mortgage is held by one of the government sponsored entities like Freddie Mac or Fannie Mae you might be eligible to refi under a special program that was created by the Obama administration. Go to makinghomeaffordable.gov to see if you’re eligible for mortgage refinancing with up to a 105% loan-to-value ratio.

If your mortgage isn’t held by one of the government sponsored entities, you believe your loan-to-value ratio is under 80 percent and you want to looking into refinancing, check our mortgage rate tables for current refinance rates in your zip code.

Mortgage Rate Tables

Related: Mortgage Refinance Rates Informer