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2012-10-23 11:06:32
Serial Refinancing makes a comeback


Many homeowners are refinancing over and over to take advantage of low rates.




Homeowners in Salt Lake, Holladay, Draper, Sandy, and South Jordan are eager to lock in lower monthly mortgage payments, and rightfully so. Many have discovered serial refinancing, a practice last in vogue during the housing boom.

To keep up with falling rates, almost 2.2 million homeowners have refinanced their mortgages at least twice since 2009, according to data compiled for the Wall Street Journal by SMR Researcj, a mortgage-research firm in Hackettstown, N.J.

From 2006 through 2008, 3.5 million homeowners refinanced at least twice.

There is little incentive to stop refinancing.  Rates are still hovering near record lows, and lenders are increasingly offering to waive some or all of the closing costs for the borrower, making refinancing effectively free or at least very cheap.

The last time homeowners were so eager to refinance, it was a more expensive proposition.  At the height of the housing boom, 86% of borrowers who refinanced  took out cash and ended up with a higher loan amount, according to Freddie Mac.  To do so, they typically agreed to pay thousands of dollars in closing costs and often a steep prepayment penalty, a fee levied on those who paid off  a substantial portion or all of a mortgage, typically in less than four years.

Those costs made refinancing prudent only for those who could get a significantly better rate, often two percentage points or more, financial advisers said, and who expected to stay in their home long enough for the monthly savings to offset the upfront costs.


Today, lenders say, some borrowers are refinancing when rates drop as little a three-eighths of a percentage point. 

For many borrowers, it means a lower rate than they're currently paying and no closing costs.  They no longer have to commit a home for a specific period to recoup their expenses, which means they can sell if they need to, without having to eat the refinancing costs.


Refinancing isn't an option for every homeowner.  Some borrowers with poor credit scores might not be able to obtain a rate that's low enough to make refinancing viable.  Homeowners who owe moreon their mortgage than their home is worth can try the federal government's Home Affordable Refinance Program if they qualify.


Info by AnnaMaria Andriotis of MarketWatch

 

 

 

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