Tuesday, December 26, 2006

The Joy of Refi

The heyday of mortgage refinance may be waning, but it isn't gone. About a year and a half ago, with mortgage rates at historic lows, I refinanced a rental property I own. This is significant: since it used to be owner occupied, I had a pretty good rate relative to the none-owner occupied mortgages that were available to me after I moved out. When I refinanced, rates had finally dropped enough to where the non-owner occupied refi rates would beat my original owner-occupied rate. In order to ensure that I was getting a good deal (it's difficult to make an apples to apples comparison when you're restarting your 30 year clock after a number of years) I took a "no closing costs mortgage", so then I only needed to ensure that the rate offered was lower than my previous 7% rate. As an added bonus, I got the Private Mortgage Insurance (PMI) eliminated at the same time.

The result was that I have several hundred dollars a month back in my pocket, which makes life a lot easier and made it easier for me to finance the monthly payments on my new residential property.

While rates are going up, mortgage refinancing still presents opportunities to save money. For example, a lot of people took adjustable rate mortgages a few years ago that could be getting ready to sting them. If they've gained some appreciation on their property, they could lose the PMI and lock in a rate that, while not the best ever, could beat the heck out of adjustable rates kicking in. If you took an ARM with the expectation that you'd be selling, and have changed your mind, refi could be a real life-saver.