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Time to refinance or go wait-and-see?

Mortgage rates at 20-year low

Lower mortgage rates seem to be holding steady, at least for the time being, and for a lot of people that might mean it is time to think about refinancing.

But Roy Ward, CEO of Horne CPA Group, said bankers were not seeing the flurry of refinancing they were seeing in the last turndown in rates, nor was he seeing the big flurry of people using the equity credit lines these days.

“If they reduce rates again, which Mr. (Alan) Greenspan said they may, it could get down low enough that it would get more peoples’ attention,” Ward said.

The reason many people are not taking advantage of the low rates now though, is because the cost of refinancing in many cases is an expensive one.

“I think if it’s between the 6% to 6.5% range it might get peoples’ attention but I think it’s going to take another half point; one reason is because of the cost of refinancing,” Ward said.

With an equity line though, the costs that are incurred are not as high as a refinance, Ward said.

“A lot of people who maybe had a loan in place and need cash are using the equity line,” he said. “It’s so much more convenient.

“A lot of people are conserving cash right now too. Trying to reduce debt as much as they can. Other bankers, other business people echo some of the same things we’ve seen.”

Kate Sharp, assistant vice president of Liberty Mortgage in Jackson, has been in the mortgage business since 1975.

“I do think this is an excellent time to refinance,” she said. “A lot of people are taking equity out of their property and not reducing their interest rate a great deal but reducing their monthly payments. They will minimize their overall outgo of monthly debt by pulling cash out and paying off existing debt.”

Others, she said, are choosing to reduce the terms of their mortgages from 30 to 15 years, knocking interest off their loans.

But, Sharp said, it may not be advantageous for someone to refinance if that person will not be staying in their home for more than three to five years.

“We are seeing numerous people calling and looking,” Sharp said. “There are many issues they look at. Some have adjustable rate mortgages and want to get into a fixed rate. Some are reducing the terms of their loan and therefore adjusting the amount of interest they’ll be paying. If you can afford it I do think it’s an excellent time now to take advantage of lower rates.”

Scott Garner, president of Pinnacle Mortgage Company in Brandon, said things are a little different than they were years ago because there are more options available when it comes to refinancing.

“Much of what we do are no-cost refinances,” he said. “You can do FHA or conventional. You can do it at a rate above market rate and in return for doing the mortgage at that rate we will pay the closing cost. Even if someone only saves $50 a month it may be worth it for them because all they have to do is sign paperwork.”

Garner said, “I’d much rather have that money than send it to my mortgage company.”

As long as the stock market continues to be weak, Garner said, mortgage rates will stay down.

“Most people can’t say ‘we’re going to be in this house five years,’ which is why most of our refinances are the no-cost,” he said.

The cost of a refinance includes a loan closing attorney, title insurance, an appraisal and other closing costs that, when done “no-cost,” are paid by the lender and in turn paid by the borrower through their rates.

Before deciding to refinance, Sharp said several things should be taken into consideration.

“It all depends on a person’s economic situation,” she said. “It’s all commiserate to how it’s going to positively affect your pocketbook in the long run and with the payments.”

Sharp’s advice: “Always talk to the mortgage company because every case is different.”

Contact MBJ staff writer Elizabeth Kirkland at ekirkland@msbusiness.com or (601) 364-1042.


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