Should you refinance your mortgage?

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"This has been a phenomenal year in the mortgage industry," said Tammy Rowe, a mortgage broker who operates West Virginia.

Rowe said a refinancing frenzy started following the Sept. 11 terrorist attacks, when rates became volatile and dropped. She said three groups of customers are prime candidates for refinancing:

n People who took out fixed-rate mortgages in 1998 and 1999 with interest rates of 8.25 percent to 8.5 percent, who may refinance to take advantage of rates that are considerably lower. n People with adjustable rate mortgages who may refinance with a fixed-rate mortgage.

"With an adjustable rate mortgage, you're playing the market, taking a risk, because when the mortgage adjusts, it will adjust to whatever the market is at the time, with the cap that is on that particular mortgage," she said. With a fixed rate, mortgage holders are "locked into that one low interest rate for the life of the loan."

n People who are able to drop their private mortgage insurance because they have paid at least 80 percent of the loan value. The insurance on a loan of $ 100,000 amounts to about $ 60 a month, she said.

Rowe said she has made 244 loans over the last several months and almost all of the activity has been in refinancing. She said that because of the rush, it takes 30 to 45 days to close a loan.

Doug Stinson of Stinson Financial Services said there was a lot of refinancing activity from January to March, when rates were substantially lower than they had been six months earlier, and then after Sept. 11.

"Rates hit bottom around Nov. 1," he said. "We did tons of refinancing business all fall." Although rates have moved back up, "on an historical basis they're still very low."

Stinson said anyone with a mortgage should consult a mortgage broker and take the time for an in-depth look at his or her particular situation.

And every situation is different. "If you have an adjustable rate mortgage or a mortgage with a balloon payment and you want to go to a fixed rate, it might still make sense" to refinance, he said. On the other hand, even if you could refinance at a much lower rate, it wouldn't pay to do it if you only have a few months left on your mortgage.

Stinson said the key is how much money a person might save by refinancing.

"Home ownership is defined by not having a mortgage," he said. "Somehow, we Americans have gone to maximum amortization - 30-year loans. If you go to a 20- or 25-year loan, you can save a ton on interest. A lot of people with a 20- or 25-year mortgage won't look at a 15-year mortgage because they think their payments will double, but the payments will actually go up about 25 percent."

As for the future, Stinson said, "Long-range rates are theoretically a function of inflation and the strength of the economy." Although the nation is officially in a recession, the recent increase in rates indicates that the bond market perceives that the economy is strengthening, he said.

Stinson predicts that in the coming months, mortgage interest rates will be flat or go down.

"My guess is as good as a flip of the coin," he said.

Dale Dawson Clowser, vice president of mortgage origination in West Virginia, said BB&T originated about 35 percent more mortgages this year than its goal. Clowser said about 65 percent of BB&T's business has been in refinancing and 35 percent in new purchases.

"It's been a real challenge to get the consumers to understand the prime rate doesn't set the rate for the mortgage," Clowser said. "The consumer sees zero percent car loan rates. I think the client expects mortgage rates to fall in the same manner. But mortgage rates are tied to the bond market, not the prime rate."

David Robertson, president and chief executive officer of a bank, agreed that long-term rates haven't declined as much as the public thinks. Even so, "if you got a mortgage loan 1 1/2 to 2 years ago, it's probably a good idea to re-evaluate your situation," he said. "There certainly is some savings to be had out there. It's just a matter of taking the initiative to call around and reevaluate your own personal situation."