Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, January 20, 1992 TAG: 9201190021
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: The Washington Post
DATELINE: LENGTH: Medium
DO SOME FIGURING BEFORE REFINANCING
For homeowners pondering refinancing questions, experts offer this advice:"A good shorthand approach" is to match your rate against those now offered, said said Mortgage Bankers Association of America Executive Vice President Warren Lasko. If you can get a new interest rate 1 1/2 to 2 percentage points lower by refinancing, you should consider it.
But homeowners should look carefully at their personal situation as well. Even with few or no points, there are costs associated with refinancing. Lenders will likely want a new appraisal of the property, a new credit report on the borrower, an updated title check and title insurance, and, possibly, a new survey. In many jurisdictions there are taxes for recording the loan, as well as title company or attorneys' fees.
Jim Abbott, president of First Union Mortgage Corp. of Charlotte, N.C., a mortgage banking firm that originates loans in all 50 states, said these costs typically run about 2 percent or 2.5 percent of the loan amount.
Thus the homeowner must be reasonably certain of remaining in the house long enough to recover these costs. The homeowner should determine what the new payment will be - there are tables or computer programs that do this, but lenders will also help - and subtract that amount from the current one. That difference, divided into the refinancing costs, shows how many months it will take to break even.
There are also tax considerations. Points paid in a refinancing cannot be deducted all at once, as they can in a purchase, unless the money from the refinancing goes to improve the home.
And there are limits on the size of the mortgage for which interest is deductible. Under current law, a homeowner generally may deduct the interest on a loan equal to the old one plus $100,000.