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Mortgage Rates at Record Low, Few Refinancing

Written by Nickel - 26 Comments

Mortgage Rates at Record Low, Few RefinancingIn case you haven’t been paying attention… Freddie Mac says that mortgage rates have declined to a record low of 4.57% on a 30-year fixed rate loan.

Interestingly, even with these historically low rates, there hasn’t been much action. Home values are down and many homeowners are upside down, and thus unable to refinance. Others can’t qualify given the higher underwriting standards. Still others have already refinanced in the past few months and doing so again doesn’t make financial sense.

What about you? Have you recently refinanced? If not, are you thinking about doing it now? If we hadn’t paid off our mortgage, I’d be thinking very seriously about refinancing. As things stand, however, I’m not interested in re-mortgaging even at these rates.

Source: Associated Press

Published on July 8th, 2010
Modified on July 13th, 2010 - 26 Comments
Filed under: Mortgages

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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26 Responses to “Mortgage Rates at Record Low, Few Refinancing”

  1. 1
    ckstevenson Says:

    What rate could one get for a no cost refi given today’s rates? I refi’d from a 6.25% that originated 2.5 years ago, to a 5% around this time last year. Saving another 0.4% would be nice, but wouldn’t make a dramatic impact to my monthly payment (I never reduced my payments when I refi’d, I am now paying down the principal each month).

  2. 2
    PMT Says:

    Would refi if I could but too upside down due to market conditions. That being said so long as mortgage rates stay low I’ll do better than a refi as I am currently at 3.5% on an ARM that has adjusted down the past two years. Hope that it remains the same this year but can handle any increases that may come.

  3. 3
    Katy Chang Says:

    I’d love to be able to refinance, however, the value of my property has dipped… so now I can’t take advantage of refinancing given that my Loan-to-Value is so high. The frustrating aspect of all of this is I paid off (for me) a substantial amount of principal from the original purchase price so my LTV was 60%, but now with the depressed assessed value I’m looking at 85-90% (sigh), and banks are requiring <80% LTV. I'd love to move into a 30 year fixed (5/1 ARM), but I don't have the equity to pay down to get the refinance.

  4. 4
    Ethan Says:

    I’d like to refi and I have enough equity/cash to do it, but I recently started working entirely for myself. Even though my actual income is plenty to qualify, the only documentation anyone will accept is two years of tax returns showing the level of self-employment income I want to claim. So… I can’t refi for two years. :( It’s a shame, because I could drop from 6.125% to about 4.75% now.

    @Katy: Have you looked into alternative financing for the remaining 5-10%? Consumer credit on good terms might close the gap (balance transfer offers, Lending Club, etc.). You might have to put all of your refi savings toward that debt for a few years, but afterward you’d see a big improvement.

  5. 5
    Rosa Says:

    We refinanced…man, maybe two years ago now? Maybe only a year and a half. We went down to a 15 year mortgage, so our percentage is already at a “record low” number – I actually kind of love quoting it to mortgage marketers who call, it gets them off the phone quick.

  6. 6
    Blaine Moore Says:

    I refinanced a year or so ago so my rate is only slightly higher than what I could get now, and it wouldn’t be worth refinancing.

  7. 7
    Ser Says:

    I’d love to but it’s impossible for me to do so since my house is upside down… the Making Home Affordable program is a joke sine MOST people are waay upside down in their mortgages.

    Good thing those who can’t afford to pay can do shortsales, walk away or get loan mods while those who played by the rules are STUCK! Thank you, Washington!

  8. 8
    BG Says:

    Where do people get these ridiculous numbers? Using BankRate.com and picking the best one there — to refinance into a 30-year mortgage for a cheap house @ 4.5% fixed requires over $5,256 in closing costs in Texas.

    No wonder nobody is refinancing. They are just ripping people off in closing costs. The ‘zero-point’ rate is 4.625% and has $4,656 in closing costs.

    No thanks.

  9. 9
    Lazo V Says:

    @BG: first of all, with the new Good Faith Estimates and HUDs (Loan Settlement Statements) — all 10 EXTRA pages worth of information most loan applicants ignored in the first place, you can go get several quotes for mortgages and see if you’re getting “ripped off”. Some things in the mortgage process have not changed, like the rediculously high cost of title insurance (which is calculated based on the loan amount) — in your $4,656 example…you’ll have to look at what the mortgage was for…a $300,000 mortgage will have considerably more closing costs than a $100,000 mortgage on the difference in title insurance alone!

    The new GFE and HUD are supposed to spell out the costs more clearly. More clearly = many, many more pages.

  10. 10
    CF Says:

    We’re presently at 5.25, which we got in 2003. I’ve considered refinancing for many years, but it just was never enough to make a difference. Now we’re finally moving forward at 4.375 in a house that we’ll stay in for many years. Paying the same amount per month will shave 3+ years off the loan (including closing costs). It’s worth the effort.

  11. 11
    Courtney Says:

    @ BG – Even if it’s not a ripoff, the numbers probably don’t work out for a lot of people. We are five years in to a 30-year fixed at 5.625%. For us to refinance our tiny condo with a great local credit union, to go to a 15-year at 4.125% would cost us $3800. Our monthly payment would be essentially the same, but it would take us two years to recoup the closing costs – which is just about how much longer we plan on staying here.

  12. 12
    david m Says:

    I just locked in yesterday. I had a 15 year 5.25% mortgage that began in April 2008. I switched to a 10 year mortgage and got 4.0% with no points and no closing costs.

  13. 13
    MakingAMillionDollars Says:

    We just bought a new house and have a 5.25 fixed 30 year loan. I don’t thing a refinance would help us that much. I think people that have adjustable rate mortgages would have more of a tendency to refinance to a fixed than any others. But, I do think that there is still a very unhealthy financial situation out there when people are still upside down on mortgages and buying is stagnant at these rates!

  14. 14
    Kev Says:

    I got married last summer. My wife and I both owned homes in the same neighborhood. We decided to keep hers and rent mine out. My mortgage was already locked in at 4.875% for 30 years. Her mortgage rate was around 6.5% though so I made refinancing priority one after we got married.

    We refinanced last December with a local bank and got an awesome deal. We ended up with a 15 year loan fixed at 4.5%. The total closing costs (not counting prepaid escrow amounts) was a little over $300.00 bucks.

    I didn’t want to roll any of the prepaid escrow items into the new loan, so I had to bring an additional 2,000.00 to closing. I got almost all of that back though once the existing escrow account was closed.

    I couldn’t be more happier with the way it worked out. The deal was pretty much a no-brainer. Thanks to the rate savings, our house payment only went up a little over $100 bucks a month with the 15 year term.

  15. 15
    Dan Says:

    We’re in the midst of a refinance with Wells Fargo (formerly Wachovia). They’re giving us a no-cost refinance from 5.75% 30-year (24 years remaining) to 4.5% for 15 years. We’re shooting to pay it off in less than 10. I’ll be SO happy to get rid of the mortgage!

  16. 16
    Petunia Says:

    I’m at 5.25% on a 30 year fixed. Even if I weren’t upside down (which I am), today’s rates aren’t low enough to make a refi worth paying closing costs.

  17. 17
    BG Says:

    #9 Lazo) Those quotes I gave were for a $150k mortgage. I’m not actually going to apply if the rate-page is already estimating over $5k in closing costs to get the breakdown on where the costs are.

    I’m just saying that for me (with a 15-year 5% fixed already, 9 years left), the closing costs need to be _much_ cheaper for it to be worthwhile to refinance.

  18. 18
    William Says:

    I would love to refinance but my bank covered the closing cost and no PMI. They also Paid the first 6 months of my town house condo’s fees in return I promised not to refinance for 3 yrs..

    Think it was a good deal?

  19. 19
    Rob Says:

    We’re upside down on our mortgage and we’ve only owned our house for 2 1/2 years…we bought when we thought prices were great! Guess we should have waited longer. That said, even if we could refi, I’m not sure it would be worth since we are definitely planning to pay off our mortgage early (once our other debts are paid off).

  20. 20
    Rshen11 Says:

    In the Process of Refi right now. My Current Rate is at 5.625 and i got it down to 4.625.
    It lowers my payment around $446 a month.. although i do extend my mortgage for another 5 years.
    closing cost were bout 7K..

  21. 21
    BG Says:

    #20 Rshen11) Ouch! Though you didn’t provide enough information to be positive, on the surface that looks like a horrible deal.

    The trick I use is to calculate the break even point assuming the new loan has the exact same loan term (payoff time) of the original loan.

    For example, let’s assume you originally got a $200k loan, 30-year fixed (@5.625): payments are $1,151. You are 5-years into this (25 left), so the balance is down to $185k. You think think about refinancing into a new 30-year note (@4.625) — note, this increases the term by 5 years — and you pay $7k in closing costs.

    Compute the new loan using 4.625% (the new rate), but set the term to 25-years (the amount of time remaining on the original loan) — and add the $7k in fees to the balance. The payment on this ‘hypothetical’ loan is $1065 (remember we are amortizing this for 25-years — the original payoff term remaining).

    That is a savings of $86 a month, so to break-even in this apples-to-apples comparison, it will take almost 7 YEARS to break even with the $7k in closing costs.

    Do the same sort of calculations using your real numbers — if the break-even point is 2 years or less, then its an OK deal (the quicker you break-even the better). If it is more than 2 years, then the refinance is likely not worth it.

    The key is to do the calculations _assuming_ the loan term (length till payoff) does not change.

  22. 22
    Rshen11 Says:

    @#21 the Orign Loan is 510k (25yrs Left) The new Loan is 470k (3oyrs) give or take cuse not finished yet
    I did many calculations.
    If i were to pay my new mortgage with the same monly payment as my old mortage.. the new mortage would have a faster or similiar pay off date.
    But then i would have and extra 400+ bucks to use at my discretion.

    But the Main Reason i Refied was to get my brothers Name off the mortgage becuase i bought him out.. as well as get greater cash flow because it is a 3 familly rental..
    I was only getting $200 cash flow which is not that great cuse it doesnt cover the maintences etc..
    now im getting over $600.

  23. 23
    BG Says:

    #22 Rshen11) My calculations show you are at 2.4 years for break-even. Pretty close to the 2yr mark that you want to shoot for.

    I understand things change a lot for rentals/cash-flow etc — and remember, its just business…

    Good luck on the rental!

  24. 24
    Carol Says:

    We thought about refinancing when rates got really low a year or so ago. But we knew we’d be paying off the mortgage early so we felt it wasn’t worth the cost. Now that our house is paid off, we wouldn’t want to remortgage either, regardless of how low rates get. I hate the idea of paying interest, any interest.

  25. 25
    Floridian Says:

    Interesting point – Wells Fargo has a minimum for the no-cost refi. If you don’t owe at least $75K, they won’t do it. Closing costs are high in Florida (closing costs vary by state). We only owe $58K and are paying off very quickly (it’s our ONLY outstanding debt), so it doesn’t make sense for us to refi right now. We are at 5.5%
    ~looking forward to being mortgage free like Nickel!!

  26. 26
    doug Says:

    Here’s one

    Have 30 yr mortage (417K) at 4.75%; 1.5 years so far so about 408K principal left.

    WF offers us to refi, with Zero charges, to 4.65 for 30 years. e.g. 1.5 more years.

    Drops monthly (now at $2,175) by $75 to $2,100.

    ? Is it worth it?? If we continue to put in the extra $75 per month?

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