RefinancingSome homeowners in their 50s are taking advantage of historic low rates to refinance their homes and score themselves a mortgage-free retirement.

Mark and Jan Sass, 55-year-olds who live in Cincinnati, Ohio, refinanced their home last week to lock in lower rates, Reuters reported. They switched from a 20-year fixed-rate loan of 4.875%, with 12 years remaining, to 10-year mortgage with a 3.5% rate.

"The opportunity to look 10 years out and know that – unless things change – we won't have a mortgage when we retire looked like a smart decision," Sass told the news agency.

A Refi surge

They aren't alone. U.S. banks have seen a recent surge in loan applications that's almost entirely due to refinancing, Greg McBride, senior financial analyst at Bankrate.com, told DailyFinance.

Mortgage applications for the week of Aug. 5 rose more than 21% over the previous week and three quarters of those applications were for were for refinancing, according to the Mortgage Bankers Association, also known as MBA.

"Over the past month, refinance application volume has increased by 63%," Mike Fratantoni, MBA's vice president of research and economics, said in a statement. "Refinance applications for jumbo loans increased by almost 75% relative to last week. Despite these low mortgage rates, applications for home purchase have remained little changed through the summer."

According to a Bankrate.com survey released Thursday, the average 15-year fixed rate for a mortgage reset is 3.61%, while 30-year fixed-rate mortgages average out at slightly less than 4.5%. The jumbo 30-year fixed rate set a new record of 5.02%, the Bankrate.com survey found.

Should You Refi?

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So with all the chatter about low interest rates, is refinancing right for you? To answer that question -- or to pick the right mortgage for a refinancing deal -- homeowners should consider their home equity, credit history, time horizon, age and cash flow.

For example, homeowners in their early 50s who have lived in their homes for a number of years and have positive cash flow have little reason to stretch out a longer-term loan, says McBride. Refinancing into a shorter-term now could put them on track to pay off their house by retirement time.

Alternatively, homeowners who are in their 30s and starting a family might be looking at refinancing into another 30-year loan as a way to create more breathing room in the monthly family budget and to enable them to sock more money away into retirement or college savings. Mortgage calculators can help homeowners determine where refinancing is a good option.

For a back-of-the-envelope calculation: Divide how much will it cost you by how much you will save. That will tell you break-even point. If it will save you the amount of your mortgage payments for the two- to three-year range, says McBride, then it's generally worthwhile to consider refinancing.

See more stories on refinancing at AOL Real Estate.

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21 Comments

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jhon.morinho

Home refinancing is a good option to save our fund over interest costs. By considering the interest rate on our home financial package, we can figure out that applying home refinancing actually reduces our monthly payment, and the total cost of our home.


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July 16 2013 at 1:55 PM Report abuse rate up rate down Reply
some11bo

If you have a reasonable non-recourse loan, then you may want to think twice even though rates are low now. Once you refinance, for example in California, you cannot hand the keys back to the bank anymore. Google for "Housing bubble kondratieff wave" to understand why home prices are falling.

September 28 2011 at 1:41 AM Report abuse +1 rate up rate down Reply
Asbestos Removal

This writer, like so many others is clueless!

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September 02 2011 at 12:38 PM Report abuse rate up rate down Reply
Loan Source

I dont think it is a good idea to refinance your home at a time like this. If you are looking for extra money just go out and get a unsecured loan, just google a unsecured loan. You will find this is the better choice. If you have 710 FICO score then you are in the green for a unsecured loan, check out unsecured loan source for more info on unsecured loans.

August 17 2011 at 12:40 PM Report abuse rate up rate down Reply
Boomslang

Look at what happens when you have a "for profit" motive in certain arenas: Health insurance: doctors report having to explain to insurance company employees with no medical training why certain drugs cannot be substituted for cheaper ones,its all about money-putting patients lives at risk.Those medicines dont have to cost that much and the insurance shouldnt pick out which ones they like over a doctors medical expertise.

Education: Privatizing causes emphasis on profitability,which contrary to conservative ideology does NOT foster higher quality of service in this case.Teachers are motivated until they feel threatened by controlling sectors who demand that a specific test be used to gauge the progress of their students.Support staff(air conditioning maintenance workers) who are proven professionals are being replaced by people with questionable backgrounds and limited training,since these are now a private contractor`s employees instead of answering directly to the district,where the accountability on government workers is much more transparent. Certain jobs simply put, are better off in the hands of non-profit,regulated entities for good reasons,and here is an example of yet another sector that should fall into this category.The securities exchange comission would have been more vigilant when it first became aware of the corruption in sub-prime lending if profits were not keeping the lid on Pandora`s box with everyone taking & in turn,keeping quiet.

August 15 2011 at 9:19 PM Report abuse -1 rate up rate down Reply
1 reply to Boomslang's comment
redrvr140

The public schools in my area do not teach correct history, they are also run by socialist.

August 15 2011 at 9:50 PM Report abuse rate up rate down Reply
Boomslang

Refi requires decent credit,current steady income and one thing people do not have today--a cost to value ratio that makes the new amount you are asking to borrow less than what the house is actually worth.Since the market is in the toilet,this is the #1 hangup--estimators do a comparison,and whammo-your house just isnt worth what you are asking to borrow. Loan mods are never easy.First,it isnt good for the bank,so they move at a snails pace.Then if you get forclosed,the bank gets reimbursed by FDIC mortgage insurance,then theyll wait for the home prices to level off,and resell it.In the meantime they arent pressed like you are to keep up the place.In Florida,a home left without air conditioning in the summertime,gets humidity and mold starts growing-now that place cannot be sold without gutting the interior walls,etc--the bank does NOT CARE. The other thing is that the investor the bank sold the note to (for double the amount you owe them in many cases) holds the rights to approve your modification request doesnt care either,its better business for both to retain the original obligation in most cases.Bottom line,if something doesnt change we have a bunch of homes abandoned that are going to need to be bulldozed by the time theyre resold. This is what happens when the rich get richer and the middle class gets shafted.

August 15 2011 at 8:58 PM Report abuse -1 rate up rate down Reply
brewski

$7,000 bucks in costs to refi?? You need a better bank or credit union. I refinanced this week at 3.25% for 10 years and the closing costs (non-interest) were $1,950.
If the cost of refinancing is difficult to get a grip on (mercuriojoe) go to EXCEL and get the amortization tables so you can do all the interest owed calculations for various interest rates and lengths of loan. Figure in your refi costs and now you can do the financials. Just because you are only 3 years into a mortgage does NOT mean you will not save money refinancing. The 36K in interest spent is gone, it is not a factor in any refi calculations. If you do nothing you have spent the 36K. If you are getting a big drop in rate, roll closing fees into the mortgage and calculate the new cost of refinancing. Lots of situations to analyze to determine if you will save money, having the amortization tables makes it much easier!!

August 15 2011 at 7:29 PM Report abuse +1 rate up rate down Reply
frankie

Clueless, if your home now is underwater by 40%, you can't get a reFi unless you have the 20% down and the closing costs are like $7000 bucks. My home appraised for $380K in 2006 now its $222K and I added three bedrooms and a extra bath at $36000. What a Joke

August 15 2011 at 6:30 PM Report abuse +2 rate up rate down Reply
1 reply to frankie's comment
twobn2it

Wow, you got a bargain. In nyc adding 3 bedrooms and a bath would be over $150,000 easily. Hell just a new bath would be $10-15,000. If I could get anything done for $36,000 I'd be grateful. Cutting down my tree is $2500, and it isn't 100 ft. tall or 100 inches around. Learning to do a lot of the work myself, just did a plumbing repair that was estimated to be $2500 for about $200,

August 15 2011 at 9:02 PM Report abuse rate up rate down Reply
mercuriojoe

This writer, like so many others is clueless! She is not taking into consideration the interest already paid. If you refi after even 3 years and you pay 12k a year in interest, your breakeven is 36k PLYS the refi costs! How do these people get printed?

August 15 2011 at 2:45 PM Report abuse +1 rate up rate down Reply
gmydogbud

Where are the American people, going to get the money to refinance their mortgages? It cost money to refinance and thanks to Mr "Hope and Change", Millions are out of work!

August 15 2011 at 1:59 PM Report abuse +4 rate up rate down Reply