Is refinancing the right move for you?

Historically low rates and several federal programs could help make mortgages cheaper for many homeowners across metro Detroit.

“Rates are really, really historically low right now,” said Mark Workens, CEO of Mortgage One Sterling Heights. “I would say a majority of people … should be looking at refinancing.”

Workens said many people should even be able to refinance for “virtually zero costs.”

“The old rule of thumb of a point or a point-and-a-half that you need to save, that’s totally out the window,” he said. “The bigger the mortgage, the smaller the change you need to make a difference.”

He said homeowners could check to see if refinancing is worth it by giving his office a call or even inputting a little information online.

And a new option under the federal Home Affordable Refinance Program (HARP) means that even more people could be eligible to get a lower rate.

“There’s still HARP money out there, but the big change is they’re talking about the reduction in costs,” he said.

Workens said companies like his won’t be able to take advantage of the change until March when the automated system they use is updated, but Rob LaPerre, president of Great Lakes Mortgage Funding in Sterling Heights, said homeowners who have a bank currently servicing their loan should be able to start the process now.

The biggest change is the fact that homeowners who are “underwater” on their mortgages are now eligible for help.

Borrowers who have mortgages backed by Fannie Mae or Freddie Mac and whose mortgage balance exceeds the home value by more than 25 percent (the old limit) can now refinance under the federal HARP program. In addition, the new rules waive certain closing fees, particularly for those who refinance to 15- or 20-year fixed-rate mortgages instead of those who choose a 30-year loan.

To qualify, homeowners must be current on mortgage payments for the last six months and cannot have made a payment late more than once in the past year. Fannie Mae or Freddie Mac must have acquired the mortgage no later than May 31, 2009, and the mortgage must be a one- to four-unit dwelling that serves as the homeowner’s primary residence.

Homeowners can learn if the federal agencies own their loan by visiting www.fanniemae.com/loanlookup or https://ww3.freddiemac.com/corporate.

Workens said he anticipates rates staying low in the near future.

“I think the FHA (Federal Housing Administration) rates are going to be inching up, (but) it won’t be substantial,” he said.

He said his company is already working to take advantage of the HARP program for their customers.

“We’re compiling a list of people that we think are going to qualify for this program, so when the thing hits, we’re going to be scrolling through the list,” he said.

LaPerre said he has seen a lot of clients come in and refinance a 30-year mortgage that they’ve had for several years to a 20-year loan, so they don’t reset the clock.

He said what program homeowners take advantage of depends on how much money they can save. Right now, he said many homeowners are still taking advantage of the Homeowner Affordability and Stability Plan (HASP), which was introduced three years ago by President Barack Obama to help homeowners refinance mortgages owned by Freddie Mac or Fannie Mae.

The caveat with that program is that homeowners can’t be underwater on their mortgage by more than 25 percent. But with home values inching up, that isn’t as much of a problem as it was in past years.

It “all depends on how long they’re going to stay in their house,” LaPerre said.
If a theoretical homeowner can save $316 a month on a refinanced mortgage with
$2,000 in closing costs, “if they were planning to move in three months, they aren’t a good refinance candidate because they’re not going to recoup their money. They’re going to recoup their costs in six months.”

The HASP program also allows those refinancing to roll up to 4 percent, or $5,000, of closing costs into the new mortgage.

“The rates are so good,” he said. “If we can make the homes more affordable, keep people in them, less foreclosures, I think that’s the name of the game here. It’s going to help them and boost the economy a little, too.”