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CNN Today

Is Now the Time to Refinance Home Mortgages?

Aired January 12, 2001 - 4:40 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

JOIE CHEN, CNN ANCHOR: During out first segment this hour we looked at how today's lower mortgage rates bring the possibility of savings -- big savings, perhaps, to you. With rates having dropped now to their lowest levels in nearly two years, the question is could they go even lower or is now the time to refinance your home?

Joining us now, a man who's hearing that question quite a bit: Fred Flick, vice president of research at the National Association of Realtors. Thanks for being with us, Fred.

FRED FLICK, NATIONAL ASSOCIATION OF REALTORS: My pleasure.

CHEN: All right, so that's the million dollar question: Is now the moment to refinance? We're talking about below 7 percent. It sounds pretty good.

FLICK: Well, this is pretty good, certainly over the past year. Rates have gone down as low as say 6 1/2, 6 1/4 if you take a longer time span. But this is a very good time now. It's possible the rate could go down a little lower, but I'm not sure exactly how much.

CHEN: The question people always ask is what is the cut-off point? I mean, my mortgage, I think, is like 7 1/4. How far do I have to see it go down for me to actually benefit by refinancing?

FLICK: Well, the kind of financial rule of thumb has always been a 2 percent drop, and you're going to stay in the property for roughly three to five years. But I think that right now, with mortgage financing decreasing in costs and it's very efficient now, that probably that rule can be bent a little bit. I would say certainly if you have a mortgage that's upwards of say 8 percent or more now, you might want to consider refinancing into something under 7 percent.

CHEN: Right, because there are some mortgages being offered with like zero closing costs, and this sort of thing. If that's the case, maybe it won't cost me so much to refinance; right?

FLICK: Well, I think that's right. I think there has been a drop in the cost of mortgage refinancing over time, and it probably actually will become less costly over time as we develop electronic means of transferring documents and these kinds of things. So, it'll be much -- a more efficient operation.

CHEN: We talked most about that 30-year mortgage number, but I get the feeling that people, consumers are pretty savvy these days. They do the arms. They do things that they're able to look out over the long term and say; yes, I'm going to be able to afford this much more house if I go with the adjustable rate or something.

FLICK: Well, I think that's right. That is the concern, and also it depends on what your -- how you feel about inflation. Right now, we're not seeing much inflation. We don't expect a lot of inflation in the future. An adjustable rate mortgage may be worthwhile taking on to be able to afford that slightly better house that you would like to buy and that gets you into it a little bit earlier. And then you can always plan on financing down the line. I just did that myself a little over a year ago.

CHEN: All right, Fred Flick, National Association of Realtors; thank you for your advice and information.

FLICK: My pleasure.

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