(Marketwatch) — Homeowners eager to lock in lower monthly mortgage payments have discovered serial refinancing, a practice last in vogue during the housing boom.
To keep up with falling rates, almost 2.2 million homeowners have refinanced their mortgages at least twice since 2009, according to data compiled for The Wall Street Journal by SMR Research, a mortgage-research firm in Hackettstown, N.J.
From 2006 through 2008, some 3.5 million homeowners refinanced at least twice.
There is little incentive to stop refinancing. Rates are still hovering near record lows, and lenders increasingly are offering to waive some or all of the closing costs for the borrower, making refinancing effectively freeor at least very cheap.
Dean Spalding, a financial-services executive in Louisville, Ky., has refinanced his 15-year mortgagewhich now has a balance of roughly $350,000four times since 2009, including twice in the past 12 months. Over this period, his rate has dropped from 4.25% to 2.875%. After his last refi, he says, his monthly mortgage payment dropped by about $150.
“It has been a no-brainer,” says Spalding, who used First Commonwealth Mortgage, a mortgage broker based in Louisville.
The last time homeowners were so eager to refinance, it was a more expensive proposition. At the height of the housing boom, 86% of borrowers who refinanced took out cash and ended up with a higher loan amount, according to Freddie Mac.
To do so, they typically agreed to pay thousands of dollars in closing costs and often a steep prepayment penalty, a fee levied on those who paid off a substantial portion or all of a mortgage typically in less than four years.
Those costs made refinancing prudent only for those who could get a significantly better rate, often two percentage points or more, financial advisers said, and expected to stay in their houses long enough for the monthly savings to offset the upfront costs.
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source: thenichereport.com
