Good time or bad time to refinance?

I have a 10-year ARM* that I’m 3 years in to. At the beginning of this year, it was my plan to refinance in 2009 so I can settle into a 30-year-fixed. Everything has gone as planned and I will be ready to refinance next year.

But, if you haven’t noticed, there’s an awful lot of turmoil in the mortgage industry lately. I have no idea if this means it is a great time for me to refinance or a horrible time.

I have a great credit score (close to 800…I haven’t checked recently), an impeccable credit history and have never missed one payment on my mortgage in 3 years. I will have plenty of income to cover the higher monthly payments that will come with the new mortgage - in fact, I’ve been paying extra for a year now just to prove I can do it.

My mortgage company, Countrywide, was recently bought out by BoA. So far I haven’t noticed any changes. I’d like to stay with them as I think I end up saving on some closing costs if I do, and I haven’t had any bad experiences with them so far.

What are The Analysts saying about what I should do? I’ve got 7 more years to “wait it out” if need be but I’d like to get into a 30-year fixed sooner than later just for the peace of mind and to stay on track with my financial goals.
*Please do not make this a discussion about what a moron I am for getting an ARM. Not all ARMs are a bad deal. I have handled mine perfectly fine and am not an idiot for having gotten one.

The best thing for you to do is to call up your mortgage company, tell them you’re interested in refinancing, and see what they’ll offer you. They’ll probably be happy to get you into a fixed mortgage–after all, you’re in good shape now, but that’s no guarantee you’ll be in good enough shape in seven years when the loan resets to God-knows-what, and it’s not bad for them to eliminate a source of uncertainty.

IMHO it is a good time. Interest rates are historically low, so it would seem to be good time to get locked into a fixed.

It is a great time to refinance if you have good credit, and you have a decent amount of equity (over 30%) in your house.

I just did it (closing today) and got a 30-year fixed for 5.625%, no lender fees and no points.

Staying with BofA shouldn’t be a factor in the decision. Why do you care who services your mortgage…it’s just a company that you write a check to every month.

If you find a good 30 year fixed rate, and were planning on doing it anyways, this is a good time. Rates are fairly low.

First, congrats on your housing and financial situation.
Second, I’d refi tomorrow if I were you.
Rates may get worse, but it’s highly unlikely they’ll get any better no matter what happens going forward.

I can’t quite do it tomorrow. I want to pay off my credit card debt first and that won’t be until the end of this year.

I don’t have a huge amount of equity in the house. Just over 10%. I have made improvements since I’ve gotten here, though.

I WISH I could do it today. I’m just afraid I’ll end up paying extra to do so and I don’t have any money to pay into it now.

Maybe I’ll give them a call, though, and see what they can offer me. Perhaps I can get a couple bucks extra and pay off my credit cards with that.

Fercrisakes, don’t dump home equity money into credit cards.

Refinancing now doesn’t mean you can’t do it again later if the rates go down more. Too often and you won’t make back the fees, but you’ve got plenty of time. Just make sure you don’t have a prepayment penalty.

BTW, ARMS are a good deal when you think rates are going down, like in the '80s. The rate on our ARM dropped back then - when we felt it hit bottom, we got a fixed loan.

In the end, I think ultrafilter got it right on the first response. Call and see what they are offering. If it doesn’t look good, just wait.

Unless you are totally in love with your current lender (hey, it happens), try a different one first. Banks love taking business from each other and your current lender might not be in a rush to refi you and give you the best deal.

You were already planning to do this anyways.

I’m with Countrywide and I get refi notices by mail, email, and telephone several times a week. Are you not getting those? It does seem like they’ve slowed down since the BoA buyout though.

Yes I do get the refi notices all the time from Countrywide, and yes I can easily call them right now and see what they offer.

My question wasn’t so much “will anyone let me refinance” but more “due to the current economic climate, will I get screwed on a refi right now?”

Thanks again for all the answers!

For an empirical and historical answer to “Am I going to get a good rate?” you can check here:
http://www.bankrate.com/brm/graphs/graph_trend.asp

In short, what this whole mess means is that the banks are less willing to finance and are a lot more picky about who they give money to. This is not an issue for you, since you have good credit. Once they decide you are ok to lend, this mess means that you will get a good rate, because they are fighting over the few good borrowers out there.

So no, you won’t get screwed. This is a good time to refi.

There may be some benefit to doing a refi sooner rather than later–if you are within xx months of the prior paperwork you may avoid the fees associated with new appraisals and title work–3 years out may already put you beyond that, however.

Also, they should let you refi into fixed terms of shorter than 30 years–25, 20 or 15–if you want to make progress toward shortening the length of your loan–this will probably mean a larger monthly payment or increasing your equity though. Ask for quotes on all of the available terms so you can compare.

Also, ask if they will waive fees/provide loyal customer discounts, and mention in passing that you are getting refi quotes from other banks. If you go to bankrate.com you can check current 30/15 year rates for your location to use in bargaining. Also, in my experience it is probably not worth it to pay points to reduce your rate in a refi.

Another consideration is that some lenders have 15-year rates that are 25 basis points lower than their 30-year rates.

Depends a lot on the rates involved. 15 year rates are often a bit more favorable than 30 year rates, and of course you eat away at the principal faster, so are not paying nearly as much interest. Usually the difference in payments is MUCH less than most people assume. Also, a few years into a 15 year mortgage, it takes a much larger drop in interest rates to make yet another re-fi worthwhile, saving the expense and hassle.

In my case I re-fi’d a 9.5%/30yr* mortgage I’d been paying on for 3 years (with extra principal each month) to a 6.5% 15 yr, and my payments dropped by $15/month. Actually by $115/mo. because I was no longer inclined to make the extra principal payments. A few years later, the rates dropped quite a bit more, but with only 6-7 years left on the mortgage it really wasn’t worth it to re-fi again.

  • Yes, you darn kids, that really did used to be considered a good rate for a mortgage, now go buy your own damn lawn to play on!