The Pros And Cons Of Refinancing A Mortgage Loan

Current refinance rates are at all-time lows; as such, refinancing a mortgage is more attractive than ever before. However, Hale Walker of MiMutual, believes that people need to take into account the entire cost of refinancing and not just how much interest rates will lower.

"Some people just want to brag about their low rate at the country club," Walker said adding that in some cases "the transaction doesn't make sense." In an interview with GOBankingRates, Walker shares his thoughts on refinancing options, current refinance rates and refinancing a mortgage in general.

What Is Refinancing?

Put simply, refinancing a mortgage means taking out a new mortgage loan to pay off your old one, hopefully at a lower rate. However, there's more to refinancing than just lowered mortgage rates. Additional costs of refinancing include appraisal, origination and other fees that can end up costing you more than you save.

Walker calls the idea that you're going to get the lowest rates on the market possible "hogwash."

"This just isn't going to happen for people like you and me," Walker said. "It's like saying that we should have bought McDonald's in 1960."

Rather than giving into the hype about the lowest rates ever, he urges homeowners to look at their own specific situations to see if the time is right and what their refinancing options are. However, Walker also adds that "we really haven't ever seen rates this low" and that the savings can be significant if you're going to knock a couple points off your mortgage interest rates.

Refinancing a Mortgage in 2014

Despite the historic lows in today's mortgage loan market, homeowners shouldn't base their decisions to refinance on just that aspect alone.

"We're more comfortable lending today because we're absolutely convinced that the market has bottomed out," Walker said. "If you're able to make your payments, have a good job and your credit is proven, you're not going to have any trouble refinancing."

What's more, Walker assures that this can happen in a fast time frame.

"Bigger banks are processing mortgages on slow timelines right now, community banks and independent lenders are doing it much more quickly," Walker said.

In discussing refinancing options, Walker is clear in that the process has changed greatly from the days before the financial crisis.

"They don't just want the first page of your financial statement, they want all the pages," Walker said. "We want much more documentation than we did in 2007."

And while your credit score is going to come into account, it isn't the end-all that it was in the past, as income and payment history are becoming more valued.

Can Your Afford the Cost of Refinancing?

Walker urges caution when it comes to a home refinance. He encourages homeowners to answer important questions about what the refinance is intended to accomplish. Are you looking for a lower monthly payment? A shorter term on the mortgage? Do you just want a lower interest rate?

If you're interested in refinancing a mortgage, the best thing to do is to talk to a lender who can answer your questions based on your unique financial circumstances.

"You can come in, get some answers and it won't cost you a dime," Walker said. "Even if it's not right for you today, lenders know that you're going to feel more comfortable with them down the line if they treat you right today."

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