First, let me say I'm NOT advocating going out and increasing your debt load. What I'm talking about here is borrowing to REfinance existing debt. IF you are paying over 8-9% on your mortgage this could be a great time for you to do so. IF you have other higher interest rate debt this could well be an excellent opportunity to borrow money to refinance.

If you're planning on staying where you are for the longer term you might want to consider looking into it. If you're planning on leaving where you are within a few years it might not be worth doing, however. There are some costs involved in doing a refinance. If you aren't going to stay where you are for at least 3-5 years it's probably not worth doing.

While I usually don't advocate paying off credit card or other debt with mortgage money (because most people then just run up their credit cards back up again) the rates now are simply too attractive not to consider.

Today, on average, you can borrow mortgage money on a thirty year term for under 6 1/4% on a fixed rate. You can get a fifteen year term mortgage even more cheaply (5 3/4% fixed). At that rate a $50,000 balance carries a payment of only $415/mo. and you're done in fifteen years. If you take the higher rate at thirty years you're only looking at $305/mo.

Take a look at what you're paying now on your mortgage and do some math. You might be able to use this opportunity to shorten your remaining term. Let's say ten years ago you mortgaged $70,000 for thirty years and have made your $614 payments each month since. You can, of course, continue doing do for the next twenty years or you can refinance the balance for fifteen years (saving five years of payments) and reduce your payment to $529/mo. saving yourself $85/mo. besides. If you continue making your $614 payment amount on your new mortgage you'll be done in only twelve years. You would have effectively taken eight years off your remaining term at the same payment.

All of that having been said, please remember I'm no financial expert here. I just wanted to share what I thought might be something for some folks to consider now that rates are down. I hope this helps.

-- Gary in Indiana (gk6854@aol.com), October 07, 2001

Answers

Good advice Gary, I don't think people realize how much interest they are paying. Since I prepare income taxes for many local people, I see how little of their hard-earned money goes on the principal. I have been fortunate not to have to have a mortgage, as we were able to pay as we go. I hope many others can take advantage of these low rates and get out from under their debt quicker.

-- Melissa (cmnorris@1st.net), October 07, 2001.

Gary, I filled out the refinance paper work last week. The rates quoted to me by my local lender seem to be about 1/2 pt higher than you mentioned. Why? And where does one go to look for alternatives? I'm a little leery of just giving out all my personal info to someone I don't know and can't see at a web site. Ideas?

-- John in S. IN (jsmengel@hotmail.com), October 07, 2001.

John, it could simply be that you were quoted rates prior to the most recent Fed rate cut. If you want to go online for current rates (which I did to get national averages for my post) I'd suggest checking out Bank Rate Monitor online. You can get there at www.bankrate.com if you want. You should be able to find banks in your area and current rates and points being offered. I hope this helps.

-- Gary in Indiana (gk6854@aol.com), October 07, 2001.

I checked last week into refinancing to a 15 yr mortgage, and was quoted 5.875%. I would pay back the fees involved with savings on the interest in about 14 months. Since we plan to be here longer than that, it would definitely be worthwhile!

-- mary (marylgarcia@aol.com), October 07, 2001.

Not that anyone should be in debt... :o) But if you have credit cards, you can "refinace" as well. We got an offer for a really low interest card. We put one of our high interest cards on it. Then we talked to the one we were closing and they offered even lower interest. Before when we tried to lower interest, they would hardly budge. Now is the time to talk everyone down. God bless, and don't make the mistake of getting in debt!

-- notnow (notnow05@yahoo.com), October 08, 2001.

We filed for refinancing last week also.... and since filing, the rates dropped. The rate you get also depends on your credit history. Of course, it's always best to shop around. Some lenders will let you buy down your rate, others tack it back on in closing cost. Just make sure it is worth refinancing. If you don't intend to stay in debt very long, it would be usless to pay the closing cost, just to offset the intrest rate. Just be careful, debt is debt anyway you look at it.

-- Bear (BarelyKnow@aol.com), October 09, 2001.

I must agree with Gary that this is a good time to refinance. It will probably pay to shop around a bit and get the best deal. One thing that I like to do is to plug the term "cheapest mortgage" into a search engine. This will get you a lot of information quickly.

That said be aware that reductions in the FED rate do not necessarily have an effect on the mortgage marketplace, at least not immidiately. FED reductions reflect what member banks loan money to each other for. In other words how much thier profit will be. The marketplace is run on supply and demand of money. That is to say that if nobody borrows then the (poor) rich people are not going to make as much yeild on thier money (that they loan to us).

The effect of the economy, slumping sales of houses, job losses and so on also have an effect on the marketplace. All that said if you can still qualify for a refinance (still have a job), this would be the best time in the past 40 years or so to do that. Hopefully you will be able to keep your job, and your newly refinanced property.

There is one thing that beats a low interest mortgage, and that is no mortgage at all...

-- Ed Copp (OH) (edcopp@yahoo.com), October 12, 2001.

Right On Ed!! I hope that each and every one here can make it their goal to become debt free as soon as possible. If we can all encourage each other, maybe it will help!

-- Melissa (me@home.net), October 12, 2001.