For the Home Buyer

Careful attention to interest rates can pay off

Since mortgage rates dropped to 30-year low last fall, many property owners have refinanced to take advantage of huge savings on interest and house payments. In 1998, Americans saved $7 billion by refinancing their mortgages, according to the Mortgage Bankers Association. Now is a good time to look into refinancing if you haven't already.

On average, homeowners who refinance their 30-year loans are dropping two percentage points on their interest rates and saving $100 to $150 a month on their house payments. The ability to reduce their monthly mortgage payment is still the top reason homeowners refinance, but there are other options that make refinancing attractive.

Reduce the life of the mortgage

Converting a 30-year mortgage to a 15-year mortgage builds up equity in your home faster and can save thousands in interest over the life of the loan. But a 15-year mortgage is not for everyone. Some prefer the flexibility and lower payment that a 30-year loan offers. You still have the option of paying additional principal each month without being obligated to the higher monthly payment of a 15-year mortgage.

Pull cash out of equity

Some homeowners are trading in their current mortgages for new ones with higher balances at today's lower rates. In return they are pulling money out of the equity in their home. "Cash-out refinancing" has become more popular with those looking to consolidate debt. They are using the cash they receive at closing to pay off high-interest credit cards, auto loans or student loans. Others are using their equity to pay for remodeling projects or to invest in higher-yield mutual funds or stocks.

Who is refinancing for you?

If you are considering refinancing there are a number of questions you need to have answered to determine the right plan for your unique financial position. How much will you be able to save each month and over the long term? How long will it take to break even on the refinancing costs? Should you convert from a 30-year to a 15-year mortgage? Should you lock in the interest rate? Your Cornerstone Brokerage agent can recommend an experienced lender who can answer those questions. He or she can also guide you through the refinancing process and find the package that suits your needs.