Refinance your home loan?

Do the lowest mortgage rates since the mid-1950s mean it's a good time to refinance your home loan?

That depends mainly on what rate you have now — and whether you're planning to move anytime soon. Experts advise weighing your options carefully.

Mortgage rates fell this week to their lowest point on records that mortgage company Freddie Mac has kept since 1971. The average for a 30-year fixed-rate loan sank to 4.69 percent. The previous record of 4.71 percent was set in December. Rates for 15-year and five-year mortgages also hit lows.

The last time long-term rates were lower was in the mid-1950s, when they averaged around 4.6 percent. Those loans typically lasted 20 or 25 years, unlike today's standard 30-year fixed mortgage.

Here are some answers to common questions about refinancing mortgages.

Q: How much does refinancing cost?

A: It can cost several thousand dollars. Typically, there's a fee that goes to the mortgage broker or lender, plus fees for title insurance, a new appraisal, document processing and other charges.

But brokers or lenders have ways to make upfront charges invisible to borrowers. They can, for example, create the appearance of a "no fee" mortgage by adding the costs to the total loan amount or by charging a slightly higher interest rate.

Q: So will refinancing my mortgage save me money?

A: That depends on how soon you want to sell. Let's say you have a $200,000 loan. If you're able to cut your rate from 5.5 percent to 4.69 percent, your monthly principal and interest payment will drop by about $100 — from about $1,135 to about $1,035.

But if your lender charges fees of $4,000, it would take more than three years to break even. The deal would make sense only if you planned to stay longer than three years .

Q: What kinds of loans are available?

A: Since the subprime lending bust, most lenders have eliminated the riskiest loans. These included loans that let borrowers make only interest payments for the first few years. Other risky loans required no down payments or proof of income. The Federal Housing Administration lets buyers get loans with down payments of at least 3.5 percent. That's how most first-time buyers are able to get mortgages these days.

Q: What's the difference between a loan modification and a refinanced loan?

A: Loan modifications are for borrowers who are behind on their mortgage or on the verge of falling behind. They involve a reduction in the interest rate or a temporary break on payments. By contrast, a refinanced loan is an entirely new mortgage, often made with a different lender.


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