Mortgage rates are at an all time low and that's spurring many homeowners to lock into a lower rate. Homeowner Shelby Wilson has a lot more money in his pocket these days. He took advantage of the historic low interest rates and recently refinanced his home. Wilson says, "I just banked it. Took a nice vacation, paid off my car, it’s kind of like a rainy day fund for me."
He was able to lock into a 30 year fixed mortgage and drop his rate by one percentage point from 7% to 6%. That lowered his monthly mortgage payment by $250. He also used some of the equity in his home to pay off debt. Wilson says, "You make your monthly mortgage payment and you don't have to worry about other payments with the car note, credit cards... It was a sizable amount I saved and with the equity I had in my house, it really was a bonus." With the equity, Wilson was able to make some major improvements around the house.
Carl Delmont, CEO of Freedmont Mortgage, says he's been flooded with applications, but not everyone is qualifying for the low rates, hovering at around 5% for a 30 year fixed rate mortgage. Delmont says, "Back then, if you had a credit score of 620 you were considered golden. Now it's more like 740."
Following the mortgage meltdown, lenders have tightened standards and that means borrowers must be in good standing. Delmont says, "If you don't have a ton of equity, great income, great assets, and a very high credit score, those low rates you're probably not going to get those." But for homeowners who qualify, it can save lots of money.
If you refinance, you should plan to stay in your home at least a couple years to recoup the closing costs.
