Time to retrench, consider mortgage refinancing - Bills.com News

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Time to retrench, consider mortgage refinancing

Friday, Oct 30, 2009
By Jennifer Hewitt

The Mortgage Bankers Association's mortgage data, released Wednesday, reveals that loan rates are hovering around 5 percent.

Loans are artificially cheap, say analysts, because the Federal Reserve has been pouring capital into government-sponsored Fannie Mae and Freddie Mac. That program is slated to end in January, and interest rates may rise once it does. In addition, recently-released data showing impressive gross domestic product growth will likely lead to higher interestrates.

If a homeowner is planning to stay at his current address for a decade or more, say experts, mortgage refinancing can a good idea. Loan rates are at near-historic lows, and households strapped for cash will appreciate the extra few hundred dollars they'll have each month after refinancing.

But, suggests Bloomberg columnist John Wasik, a homeowner can take years off his loan and save thousands in interest payments by prepaying an extra few hundred dollars in principal each month. That strategy requires
cash, though, which may be scarce. And homeowners should be careful about prepayment penalties, which may be imposed by lenders if principal is repaid early in the loan.

Recommended stories
• Home prices forecasted to decline; consumers may want to refinance mortgages Refinancing rates recently declined below 5 percent earlier in October, resulting in a flurry of refinance applications. Oct 29, 2009

• Modifying loans made easier by government incentives BMortgage servicers are often open to changing loan terms to keep borrowers in their homes. Oct 27, 2009

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