Serial Refinancing Can Save Serious Cash

Posted on September 19 By Peter Andrew

Serial refinancing is becoming something of a trend among savvy homeowners these days -- and with good reason. With interest rates plummeting to record lows earlier in 2012, homeowners who refinanced even a year or two ago are likely paying more each month than they need to. So it's no surprise that serial refinancing is gaining popularity when the alternative is equivalent to shoveling dollar bills into a furnace.

Current mortgage rates irresistible

In its August 24 article on the subject, The Wall Street Journal told the happy story of one Kentuckian who had refinanced four times in the last three years, cutting his mortgage payments by $150 a month just on the last occasion. And he's not alone. The story goes on to say that nearly 2.2 million borrowers had refinanced two or more times since 2009. But lower monthly payments aren't the only reason for the trend's strength.

Refinancing: Breathe easier under water

A recent CoreLogic report has homeowners re-evaluating their mortgages as well. According to the report, some 1.3 million mortgages "surfaced" (went from having negative equity to positive equity) in the first half of 2012. So if your home has been under water lately, you may find that there is reason to double check its current value. But even if your mortgage remains under water, it isn't necessarily cause for despair. You may be able to qualify for refinancing help from the federal Home Affordable Refinance Program if your current mortgage is owned by Fannie Mae or Freddie Mac.

Still, if inertia is preventing you from making the move, consider the following: If your credit score is good to excellent, there's a good chance you can qualify. And many lenders are slashing closing costs to make the whole process either highly affordable or relatively free.

Reduced costs bolster trend

Some lenders are picking up on the trend, offering deals that can dramatically reduce or completely eliminate closing costs. Of course, nothing is really free and, if you take advantage of such a program, you're likely to find that your mortgage rate is perhaps a 0.25 percentage point higher. Generally speaking, the better play is to pay the normal costs if you intend to stay in your home for a long time and look for other ways to reduce costs by negotiating fees.

Whether you have refinanced recently or not, one of the great things about the process is that your decisions are based on fairly simple arithmetic. You can model different options using an online mortgage calculator, the back of an envelope and an old pencil. It is usually a good idea to talk to an expert after you run the numbers, but you can have a pretty good idea of your options after just 20 minutes on your own.

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