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 Deciding if mortgage refinancing should be done
  Mortgage refinance interest rate lock periods
By the EchoBay Loans Expert
 Deciding if mortgage refinancing should be done
Dear EchoBay Expert: We're thinking of refinancing our home, in which we are in year 8 of a 30 year mortgage, but there's a possibility we may not be in the house more than 5 or 6 years. What are the most critical things that could affect our decision whether to do mortgage refinancing or not? Thank you.

Dear Loyal Reader: The first thing you want to do is make sure that you're not going to wind up in the red because of your mortgage refinancing. The goal of refinancing is to save money, but if your mortgage refinancing isn't approached properly, it could wind up actually costing you money.

If you're not going to be in the house for longer than five or six years, the first thing you're going to want to do is take the cost of refinancing and then divide it by the amount of money you'll be saving each month. Make sure that the figures indicate that you'll be in the house long enough to recoup the costs of refinancing.

You'll also want to make sure that your loan doesn't have any prepayment penalties attached to it. If you're being given the option of paying points to pay down your interest rate, you might want to rethink that. If you're going to be moving in a few years, you probably won't make your money back.

You could also go with an adjustable-rate mortgage, and if it turns out that you'll be staying in your home longer than you had anticipated, you can refinance into a fixed-rate mortgage later on. Just make sure that in the end, all of the money that goes into the refinancing eventually winds up back in your pocket.

 Mortgage refinance interest rate lock periods
Dear EchoBay Expert: What is the best strategy for locking an interest rate for refinancing my home loan? Should I go with a shorter lock and pay a lower rate, or opt for the longer lock with a higher rate?

Dear Loyal Reader: Deciding when to lock and for how long is largely a big guessing game. You can find predictions online by "experts" about what mortgage refinance rates are expected to do in the next few weeks. Many times, they are right but it's a bit like looking into a crystal ball so there are no guarantees. If you go with a shorter lock and pay a lower fee, you run the risk of your lock expiring before your loan closes.

In this case, you could end up paying a higher rate regardless. If you go for the longer lock, you run the risk of rates dropping after you lock and you could be kicking yourself for locking too early. It is definitely a personal decision for you and based on how much risk you are willing to take on.

No matter what you decide to do, just remember the important thing is to be sure you have an interest rate on your mortgage refinance that makes your payments affordable. If rates drop more, you could have saved money in interest but if they rise you could end up not being able to afford your house at all.

Try to choose a rate lock that gives your mortgage broker a reasonable amount of time to close your loan. If they say it will take 30-45 days to close, go for the 45-day rate lock rather than the 30-day rate lock. Better safe than sorry.

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Avg. National Rates
30 Yr Fixed 5.78%
15 Yr Fixed 5.39%
1 Yr ARM 4.80%
WSJ Prime 6.50%
Fed Funds 3.50%


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