Should I refinance? The Science of "Benefit to Borrower"

In today's economy, Americans are looking very carefully at their debt.  For most, our home mortgage is the biggest financing commitment we will ever make having the most effect over our lifestyle.  When considering refinancing, many factors play into the decision, including mortgage product, loan term, and how to pay for the title and lender fees.

In a recently released publication by the Mortgage Bankers Association of America's (MBA)  Research Institute for Housing America:   A Financial Analysis of Consumer Financial Decisions , experts on mortgage analytics Andrew J. Kalotay and Qi Fu review these choices and the importance of a homeowner's planned ownership horizon in determining the appropriate mortgage refinance choices .

The Optimal Mortgage Refinance Calculator   analyzes the present value of refinancing for those considering replacing their existing mortgage with another one at a lower rate.

For most of us, saving $200 a month is "good enough" reason to refinance if we are planning on living in our home for the next two years.  Because the benefit of refinancing is very sensitive to closing costs, engineers will love this article as the authors adapt the concept of call efficiency (used by treasurers to determine when to call bonds) to mortgages. 

I found this publication very helpful and plan to use the calculator on future transactions with clients.  Why on earth am I still blogging about refinancing when rates are over 5%?... answer: because people are still calling about refinancing. 

See this and other articles on the MBA's Research Institute for Housing America site .

Interest rates for June 30th, 2009 (I post these rates for clients I am working with.  These are base rates, and are adjusted at time of lock for credit, down payment, and loan size.  I don't believe in origination fees).  Rates look good today, best pricing comes with 1,200 in CNN lender fees plus appraisal:

C30/25/20 5.625% no points

C15 5.125% no points

C10 5.00% no points

F30 5.5% no points

Rural Housing 30Yr Fix 5.500% no points