The Everyday Banker

Mortage rates are low again, and some in the financial industry are even saying "historic" low rates.  You can help but think you are missing out, but how do you know if you should do anything? We sat down with 40-year mortgage veteran, Carol Porath from State Bank Financial to get some answers. 

Q1: What exactly does refinancing or "re-fi" mean?

A1: Refinancing a mortgage means paying off an existing mortgage loan and replacing it with a new one.

Q2: How do you know when (or when not) to refinance your mortgage?

A2: If fixed rates are falling you should always contact your lender to see if it is beneficial to refinance. It is possible that you could lower your interest rate, your payments or shorten the term of you loan.  If you shorten the term you will build equity faster and pay off your loan sooner.  So, there are a number of reasons, but I believe the top five reasons to refinance your mortgae are:

1. To obtain a lower interest rate.
2. To shorten the term of the mortgage.
3. To convert from an adjustable rate to a fixed rate.
4. To tap into home equity to finance a large purchase.
5. To consolidate debt.

Q3: Does it cost money to refinance?

A3: Yes, however, if you have enough equity you can finance these costs into your new loan.  In my opinon if you can make up your closing costs in 18 - 24 months by lowering your payment and you are going to continue living in this home for several more years it is worth it to refinance.

Q4: Are there mistakes that people make when they want to refinance? And if the are mistakes - what are they?

A4: I wouldn't necessarily say "mistakes".  I would say that some of the things I see that lead to problems or missed opportunities would be:

1. Not at least considering a refinance.
2. Not working with someone local that you can trust.
3. Doing a no closing cost loan.  This could be a mistake for the borrower, as the lender usually charges a higher interest rate to make up the cost of the loan. Over the life of the loan it can make the refinance more expensive for the customer.

Q5: Any advice on what is the best way to determine if refinancing is the right move?

A5: Start with someone in the business that you trust and that you know will give you solid advice.  I really think that is the best way to get started.

To talk with any of the State Bank Financial Mortgage Experts, call or click and get connected. Now is a great time to look at how you can make refinancing work OR at least determine if refinancing makes sense. 

Contact any of our Mortgage Experts or head out to the all new State Bank Financial Mortgage Center and click on the mortgage calculator. 

"It does feel like you are winning the mortgage game when you are able to lower your rate, or maybe eliminate a few years on the payments, or improve the monthly amount you pay," Carol Porath, Mortgage Expert, State Bank Financial.

Mortgages are subject to credit approval.