Thursday, June 5, 2008 --- 8:15 a.m.

Despite the downturn in the economy, interest rates continue to be at historic lows and home prices are very favorable for buyers. Now is still a great time to buy a house or refinance your current mortgage. Yet, statistics from the Mortgage Bankers Association released this morning show that mortgage applications fell for a third consecutive week, reaching its lowest level in over 6 years.

Rose Oswald Poels with the Wisconsin Bankers Association spoke with NBC 15 about the current rate environment and things to consider when deciding whether to refinance your existing mortgage.

She said:

• As reported by the Mortgage Bankers Association this morning, mortgage applications for both purchased homes and refinanced loans, dropped 15.3 percent for the week ending May 30 to 502.3.
• This index is at its lowest level since the week ending April 19, 2002.
• However, interest rates are still at very low levels.
• Borrowing on a 30-year fixed rate mortgage averages 6.17 percent, up slightly from last week. Locally, rates appear to range from 6-6.5%.
• The average is still below levels from one year ago, which were at 6.35 percent nationally.

Some things to consider when determining whether now is a good time to refinance an existing mortgage:

• You need to have a goal in mind as to what you are trying to accomplish by refinancing your mortgage.
• Interest rates and your monthly payment are common factors to consider.
• However, you need to also consider how long you plan to stay in your current home, current economic conditions and housing cycle, and other financial goals or objectives you want to accomplish with your home.
• Look at the current debt you have and see if refinancing can help improve your total debt picture.
• Educate yourself on current mortgage products and fees.

If a goal is to get better financial stability around a current mortgage, this can by accomplished by:

• If your goal is to just lower your monthly mortgage payments, then you want to look at the rate and find one that is most favorable. Typically it is good to find rates that are at least ½ percentage point less than where you are currently at. Don’t forget to consider all the costs and fees too.
• If you want to shorten the time before your loan is fully paid off, then you may want to consider refinancing to a loan with a shorter term, like going from a 30 year mortgage to a 15 year mortgage. Again, consider all the closing costs and fees too.
• If you are frustrated by the constant rate changing environment, and you currently have a variable rate mortgage that adjusts each time rates change, then seriously consider switching to a fixed rate product. Interest rates on fixed rate products are very low and the change will bring stability to your budget.

Some people consider refinancing when what they really want is to get some money out of the equity in their home for a remodeling project, or to buy a car. Options for people to consider in this case:

• Some traditional mortgage products, like a 30 year or 15 year fixed mortgage do allow for cash-out refinancing. Meaning, you can refinance your current mortgage to perhaps take advantage of a lower rate, but also as a way to get cash back at closing depending on the equity value in your home.
• You should also consider getting a second mortgage or home equity line of credit in this instance too. The interest you pay on these products are often tax-deductible as well.

Information on mortgage loans points:

• A point is a fee charged in connection with a loan if the borrower wants to reduce their interest rate.
• Typically, a point equals 1% of the total mortgage loan amount.
• In general, higher points may mean a lower interest rate over the life of the loan, and no points may mean lower up-front costs, but slightly higher interest rates over the loan term.
• You need to decide, particularly if you are planning on staying in your home for several years, whether paying the upfront points to get the benefit of lower monthly payments through the term of your mortgage will be of value to you.
• The money you pay for points may be tax-deductible.
• Your banker will definitely help you determine which product is best for your situation and whether points are worthwhile for you to pay given your financial goals.