March 8, 2012

Mortgage rates are at near historic lows, so the question inevitably arises: Is it time to refinance your mortgage? Again?

About 28 million homeowners should be asking themselves that question, according to Consumer Reports magazine. That’s how many of them are paying interest that is higher than today’s low rates.

clock and money

The consumer research organization gave the following example:

A home has a $200,000 30-year mortgage taken out five years ago at 6.5 percent. By refinancing the remaining $188,000 at 4 percent for 25 years, the payment drops $300 a month for an overall savings of $90,000.

By refinancing for 15 years at an even lower rate, say 3.3 percent, the payments would go up $30 a month, but the homeowner would save $149,000 in interest by paying off the loan 10 years sooner. The cost to refinance typically runs about 2 percent of the loan amount.

It’s tougher for homeowners to refinance if their income has been reduced or if they’re unemployed. The best candidates have regular income, at least 10 to 20 percent equity in their home and a credit score of 740 or better, according to the consumer group. But Federal Housing Administration mortgages are available to homeowners with lower scores, and those with reduced incomes may qualify for a loan modification or forbearance program.

Consumer Reports warns homeowners who are considering changing their mortgage to beware of mortgage-modification scams and offers the following advice:

  • Never deal with anyone who charges for help. Call (888) 995-4673 for free assistance from a government-approved counselor.
  • Beware of anyone who wants you to sign papers immediately, and never sign over the deed to your home.
  • Never make your mortgage payment to anyone except your mortgage company without the lender’s approval.

This article was originally posted on March 8, 2012 and the information may no longer be current. For questions, please contact GRF CPAs & Advisors at