Question of refinancing goes beyond interest rate


Q: My husband and I are thinking about refinancing. We only have about eight years left on our present mortgage. Should we? Fixed-rate or adjustable?

Ann Roemer, Kingsville

A: The rate is the first consideration. If you took out a loan even 10 years ago -- when 30-year rates were around 14 percent -- then it's probably worth it. Rates today are about 9 percent.

But you must also consider how long you intend to stay in your home. A refinance probably does not make sense if you expect to move in the next several years -- closing costs may wipe out any gains from a lower rate.

In addition, figure out your objective -- to reduce the loan term and pay off the mortgage sooner, or to reduce your monthly payments? If the former, take a shorter term; if the latter, take a longer term.

Remember, if you refinance, you don't need to take out a new 30-year loan. Since you have 8 years left, and perhaps don't want to wait longer to pay off the loan -- you can take out a 7-year or 5-year loan.

In the past, ARMs were popular as the interest rates on fixed mortgages rose; lenders that I have talked to say that they've seen an increase in ARMs lately. But the fixed-rate mortgage -- and its security -- remains the first choice of homebuyers.

Q: Are there lenders and mortgage companies that will refinance someone who has filed for bankruptcy in the past?

Mary Nelson, Baltimore

NB A: Any lender who participates in Fannie Mae (Federal National

Mortgage Association) and Freddie Mae (Federal Home Loan Mortgage Corp) secondary market mortgage programs should be able to offer you a refinance loan as long as your bankruptcy discharge is at least 2 years old and you have been able to re-establish and maintain good credit since your bankruptcy discharge.

If you can show that you now pay loans on time then you can get either a refinance or new home mortgage at the same rate available to other borrowers.

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