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If rates are heading up, should you refinance now?

As the economy recovers, homeowners are faced with the likelihood of higher mortgage interest rates in the future. Despite the average 30-year mortgage rate of 4.8 percent, refinancing isn’t always a great idea. Questions to consider beyond, “How do I get that low rate?” include “What are your current financial goals?” Many people focus on paying off their mortgage instead of planning for retirement or education savings for their children. Consider your overall lifestyle and all financial needs. Figure out when you’ll “breakeven” on the cost to refinance: generally 3 percent to 6 percent of the total loan amount. If your “breakeven” is 12 months and you plan to stay in the home 5-plus years, it’s probably worth doing.

What’s your current debt load? If you’re swimming in debt, don’t expect to get the lowest rate available. The “credit crunch” is loosening, but many lenders are picky about what rates to offer to whom and are still turning away borrowers in trouble. Try to cut your consumer debt before applying for any loan.

What’s your credit score? You have the right to your credit reports from Experian, TransUnion and Equifax once a year for free. You can order them at http://www.annualcreditreport.com/ but don’t order all at the same time.

Stagger receiving them throughout the year to stay updated on your credit picture. That gives you the chance to fix possible errors in a single report and gives the other two agencies time to update their files.

Consider biweekly payments. Your current lender might have offered a biweekly mortgage loan program to save money over the life of your loan. Discard their offer -- many lenders make big fees with these programs. See if you can do it yourself. Some lenders won’t allow it, but see if you can break up your payments to equally divide the principal and interest payments so you’re “whole” by the end of the month. Otherwise, they might apply the first half-payment to principal and still insist on the full monthly payment by the due date.

Consider adding a 13th payment for the year: Add 1/12th of your monthly payment to principal or by double-pay your mortgage one month a year when you have extra cash.

Fixed or variable? Given the uncertainty of rates, it makes sense to get a fixed rate since rates remain at historic lows. Variable rates can mean higher payments if rates rise.

Second mortgages can be problematic: Many lenders may not be willing to take “second-fiddle” status behind an older second mortgage, which happens during refinancing if not addressed. If you can’t roll the two loans into one during the refinancing process, it may delay or kill the deal based on what the two lenders are willing to do.

What about your taxes? Lenders are looking as broadly as they can these days for signs of financial trouble.

If your property taxes have been late or have other tax disputes, it can complicate matters. Make sure you’re current.

Karin Grablin, a certified financial planner with SRQ Wealth Management in Sarasota, can be reached at (941) 556-9004 or karin@srqwealth.com.

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