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Is now a good time to refinance your home?
Charles and Nancy Henson of Centerville refinanced their home mortgage last year, and Charles Henson said it was not a difficult decision.
“The rates had dropped, and we wanted to do something a little more secure,” he said.
“Our previous rate was 5.625 (percent). When the rates for a 30-year fixed mortgage dropped below 5 percent, I thought we should go for it. We ended up locking it in at 4.875 (percent).”
Low mortgage rates have made news in these recessionary times, spurring many to consider the cost benefits of refinancing their homes.
Refinancing is basically replacing one loan with another, but, depending on the new loan’s terms, it can save you tens of thousands of dollars in the long run.
If you are wondering whether this move could be a good deal for you and your family, here are some tips from a couple local experts to help guide your decision.
Factors to consider
Every refinance is unique, due to the many factors involved in each case: your loan, your credit, your home’s equity, the interest rate, the costs of the refinance, etc.
Here are some things to consider:
Interest rate. “If you can save half a point or more on your interest rate, that can be a good indicator to refinance,” said Kay Sandusky, senior vice president of the Citizens National Bank of Southwestern Ohio.
Sandusky said on Wednesday, Feb. 3, the rates at Citizens National were 4.625 percent for a 15-year loan and 5.25 percent for a 30-year fixed loan.
At Union Savings Bank, the rates were 4.5 for a 15-year loan and 5.25 for a 30-year loan.
The rates change daily.
Total cost benefit. Kim Penner, inside sales manager at Union Savings Bank, said you have to consider your total costs when considering refinancing.
“Your lowest interest rate alone is not always your best deal,” Penner said. “You’ve got to look at your total costs. You have to see if it makes sense to get a lower rate if your costs are high.”
Sandusky added: “If it is going to cost you $2,000 to do the refinance and you are saving $200 per month, do the math and consider how long you will be in the home and if that is a savings to you.”
Evaluate how much time you plan to be in your home. “How long you’re going to be in the home is a big factor,” Penner said. “If someone is going to live in the house three to five years, (refinancing) may not be a great idea.”
Short term vs. long term. “Think about what term of loan you want,” Penner said. “What are your concerns? Is cash flow an issue? Are you looking at retiring?”
He added that the sooner you pay off a loan, the more interest you save.
“The difference in interest could be $40,000, $50,000, $60,000,” Penner said.
“If somebody’s going to be living in the home for a while, that makes sense. The payment is higher with a shorter-term (loan), but it gets paid off more quickly.”
Henson is retired and his wife is self-employed, but he said they decided to go with a 30-year rate because it was a more conservative approach given the economic climate.
“We looked at 30 and looked at 15, but decided we could make a 30-year into a 15 by paying more on the principal each year,” Henson said. “With a 30-year rate, you have the flexibility if you want to pay extra.”
Know your credit score. Sandusky brought up the fact that credit score guidelines have been raised. Borrowers that have at least a 740 get the best terms.
“You really need a minimum score of 680,” she said. “If your credit score is lower, you can still get a loan, just at a higher interest rate.”
Know your home’s equity. “You have to have 20 percent equity in your home for a conventional loan without private mortgage insurance,” Sandusky said. “There are other options available, however.”
Talk to a professional. This is the best advice of all. Since your financial situation is your own, knowing exactly what your specific options, costs and savings could be are key to your decision.
“I ask a lot of questions about the borrower and offer them options,” Penner said.
Sandusky added that a bank is not allowed to charge a fee for merely discussing a client’s options.
“The only fee they are allowed to collect up-front is the cost of a credit report,” Sandusky said.
“And, if (customers) disclose their debt to me, I can give them an assessment for free.”
She added that for $30, homeowners should be able to get a full disclosure of the fees and costs, benefits and annual percentage rate of their refinance.
Another tip Sandusky offered was, if you shop around for assessments, don’t have the banks run your credit report each time.
“Multiple inquiries on your credit report in a short period of time is harmful to your credit,” she said. “Know your credit and tell the bank.”
Check it out this year. Although some economic forecasters are predicting interest rates will go up soon, both of our local experts thought they wouldn’t go up drastically before the end of the year.
“Every estimation we hear is maybe by the end of year,” Sandusky said. “It’s just supply and demand.”
Penner said inflation is coming, but he doesn’t think it will get here soon.
“The economy right now is just crummy,” he said. “People just don’t have much trust in it, and that will probably keep rates down. But, for how long is anyone’s guess.”
Henson said he is happy with his decision and would recommend refinancing to others.
“It’s all relative to what your current rate is, but if you are sitting there at 6 percent, you ought to be refinancing.”
Valentine’s Day deals this week
Love is in the air at area stores this week, or maybe just the cascades of pink hearts everywhere sending that message.
Here are the best Valentine’s Day deals this week:
Kohl’s has 50 percent to 60 percent off all fine and sterling silver jewelry today, Feb. 7, through Tuesday, during its Valentine’s Day Sale. The store also has many items — from clothes to frames to rugs — for buy one, get one free during this sale.
Kmart has its fine jewelry for 70 percent off, and Sears has the choice of heart pendants for $79.99 to $99.99.
Kmart also has large plush Valentine’s Day animals for 50 percent off this week, and many varieties of Valentine’s Day candy for two for $5.
Macy’s has been running a “Wear Red” sale this week in honor of the holiday and Go Red For Women, which is the American Heart Association’s movement that celebrating the power of women to wipe out heart disease. The sale is offering an additional 20-percent-off sale, clearance and select regular-priced purchases, for those wearing anything red. That sale ends today.
Also at Macy’s, all fine jewelry is 30 percent to 50 percent off, with an extra 15 percent off select items. That sale is through Tuesday.
JCPenney has been running many Valentine’s Day jewelry sales, as well, and has its styling product discounted up to 50 percent through Feb. 18.
Elder-Beerman has been running a special that will get you a free seven-piece gift from Clinique with any Clinique purchase of $21.50 or more.
The gift is worth $60, so if your valentine likes Clinique, you could get a present valued at $81.50 for as low as $21.50. This deal is only guaranteed through Monday, and it is limited to one per customer.
For those wanting to make a valentine for his or her beloved, Michaels is holding a Happy Valentine’s Treat Bag workshop from 6 to 8 p.m. Tuesday, and a Heart-Shaped Frame Make-it Take-it from 10 a.m. to 1 p.m. Saturday. The first workshop just costs 79 cents for the bag, and the second costs $1 for the frame.
Michaels also has valentine ribbon for 50 percent off this week.
Jo-Ann Fabric and Craft stores have all Holiday Inspirations Valentine fabrics, accessories, toys, gift wrap and items for entertaining (such as tablecloths and plates) for 50 percent off.
The store’s Spring and Home Inspirations Bushes also are half off through Saturday.
Verizon is offering a free 3G smartphone with the purchase of another, and is continuing its $30 discount on nationwide unlimited talk service. It now costs $69.99 per month.
Target has Valentine’s Day plates and napkins for $1.49, cards for 99 cents to $7.99 and candy hearts filled with M&M’s for 99 cents.
Rite Aid has its heart-shaped boxes of myriad candies for $1 to $29.99, 33 percent off assorted Valentine’s Day plush animals, 20 percent off the plush ones with candy and original gourmet Valentine cookie tins for $1.
The store also has buy one fragrance, get one 50 percent off deals, and cute Valentine’s Day socks for two for $5. Boxed valentines also are 33 percent off.
Rite Aid also has card and candy valentines kits for two for $5, which beats CVS/Pharmacy’s price. The kits are two for $6 at CVS with your Extra Care Bucks card.
CVS/Pharmacy also is loving the buy one select fragrance, get one 50 percent off idea, and has valentine plush animals starting at $3.99. Again, use your ECB card for these deals.
Walmart is selling a dozen roses for $15, large plush animals for $9 (small ones are $5) and bakeware and cookie cutters with heart shapes for $3 to $9.
Walmart also has fragrance gift sets, including Halle and White Diamonds, for between $10 and $19.
Aldi has its dozen premium long-stemmed roses for $16.99 and Valentine’s Day potted plants for $5.99.
Walgreens’ dozen roses will be $19.99 starting Thursday, but its sales on candy, stuffed animals and fragrances start today and last through the week.
Walgreens has $10 off its fragrances, and Valentine’s Day clothing and gifts from $1.99 to $6.99.
Discount Drug Mart is still cornering the inexpensive Valentine’s Day exchange card market, selling its boxes for $1.39 each. The store also has fragrances for $9.99 to $22.99 and multiple heart-shaped candy boxes for $3.99 to $6.99.
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