Refinance | Should You Refinance Again?

February 9, 2012 – 4:38 am

This post comes from Brian O’Connell at partner site MainStreet .

When it comes to mortgage rates , homeowners have been watching just how low they can go and reacting accordingly to historically rock-bottom interest rates.

When rates hit 5%, the rush to refinance was sizable. When rates fell to 4.5%, the rush to refinance was more substantial. When rates fell to 4%, the rush to refinance was downright staggering. And here we are again, with the average 30-year fixed-rate mortgage falling another rung on the ladder, to 3.87% .

With rates at “an all-time record low,” according to Freddie Mac , the rush to refinance may well reach stampede status, especially with good news on jobs (last week’sannouncement that the unemployment rate fell to 8.3% ) and more bullish sentiment elsewhere on the economic front. Post continues below.

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Refinancing, even if you just did it six or nine months ago, certainly makes plenty of financial sense these days. Freddie Mac is out with a report stating that 49% of homeowners who refinanced their mortgages during the fourth quarter of 2011 reduced the principal balance on their mortgages– the highest percentage in 26 years. (Should you refinance? Try MSN Money’s calculator .)

The study also shows that the median interest rate reduction was 1.4 percentage points, a 26% savings on mortgage interest rates, and during the first year of the newly refinanced loan the average dollar savings totaled $2,700 on a $200,000 home loan.

“Savvy homeowners are taking advantage of some of the lowest fixed-rate (mortgages) in more than 60 years to lock in interest savings,” says Frank Nothaft, the vice president and chief economist at Freddie Mac .

So even if you just refinanced, the benefits of doing so again may well outweigh standing pat. Let’s look at somereasons why it may be a good idea, and why it may not be. Here are the pros:

Not only will you reduce your mortgage rate, you’ll reduce the principal balance on your home mortgage.

More cash in your wallet allows you to use that money to pay down other debt, pay off your house more quickly or add to your retirement savings.

If you use the extra money to pay down debt, you can improve your credit rating– thus making future loans even more affordable. ( Estimate

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