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Have you refinanced yet?

Mortgage interest rates dropped again this week, hitting 4.91 percent with 0.7 points (prepaid interest) for a 30-year fixed-rate loan. That is so low it almost demands a rush to the refinancing table. (Then again, bank deposits are paying less than 2 percent, so maybe rates aren't that low, after all.)

Rates locked in for three decades now cost only 0.45 percentage points more than for a one-year adjustable-rate mortgage. One-year ARMS averaged 4.46 percent this week, according to Freddie. The the vast majority of borrowers would be foolish to take an ARM when fixed-rates are so close in price.

But should you rush to refinance? If you've lost a job or your home equity, of course, the question is moot. You won't qualify, and today's low rates only serve to taunt you with the better prospects available to others. But if you have the equity, the income and the credit rating, it's certainly worth exploring.

For example, refinancing a $300,000 mortgage, from 6 percent to 4.91 percent would save $205 each month. If you paid the 0.7 points that Freddie said was the average amount charged, you'd have to pay $2,100 in upfront interest, usually out of your equity. It would take a little over 10 months to recoup that expense, but the boost to your monthly cash flow could give anyone's household budget a nice bit of relief.

Other things to consider: All these numbers are averages, and Freddie Mac collected them earlier in the week. They were history even before they were published. And the actual rates you are quoted will depend on your credit scores and overall risk profile. You can expect to pay $250-$300 for an appraisal, plus other closing costs. And credit standards are particularly picky (and rates are higher) for anyone who needs a loan bigger than $729,750--the threshold for "jumbo" loans in expensive markets such as the Washington metro area.

Still, a little time spent with the mortgage calculators on this Web site could be worth your while.

By Elizabeth Razzi  |  November 12, 2009; 12:00 PM ET
Categories:  Buying , Loan modifications , Mortgages , Statistics , The economy  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati   Google Buzz   Previous: Washington-area home prices down 2.5% from last year
Next: Is Washington turning into a seller's market?


The reason mortgage applications are low is because people have given up on getting loans. It's ugly out there. We've got record amounts of foreclosures and repossessions (see: ). Until the lenders defrost the markets we'll only get worse.

Posted by: MikeDudical | November 12, 2009 6:09 PM | Report abuse

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