Refinancing still worth the money

Associated Press
July 16, 2004

With home mortgage rates still hovering at attractive single-digit levels, a surprising number of homeowners paying higher rates have yet to dip their toes in home refinance waters, according to a recent survey. But it may not be too late for stragglers to catch the wave of money savings many thought had reached a crest.

According to the survey, nearly one-third of homeowners paying 7 percent or higher loan rates say they "would not save enough or would not gain additional financial benefit" for refinancing to be worth the effort.

The research, conducted for Bank of America in April 2004 among 300 homeowners, sheds new light on one of the most used methods for homeowners to lower their monthly mortgage costs.

Those who minimize the financial gain are joined by an equally surprising amount of homeowners, 43 percent, who have never refinanced their home. This comes during a loan era when rates dipped near 5 percent.

Jim and Sue Cornick were among millions of homeowners to flood banks in the recent refinance frenzy as rates dropped well below 10 percent. The Iowa couple wound up saving $224 by trimming their 7.50 percent rate to 6.25 percent. Their old monthly mortgage principal, interest and real estate taxes was $1,793. Their new payment: $1,569.

Still, many don't share Jim's view that refinancing is worth the effort. Paperwork, time and perceived cost keeps other candidates at bay.

More than one in three respondents cited time-consuming documentation as their least liked aspect of refinancing. Another 23 percent mentioned closing costs as their biggest gripe.

None of which bothers the Cornicks. Jim says what they saved "more than offset the closing costs." And as for effort, the couple visited online loan calculators to analyze in minutes how differences between rates were affected by the time left on their original 30-year mortgage. They weighed payback timetables, too.

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