STEVE:  Hi, this is Steve Westmark, Counselor Realty.  Thanks again for watching my video blog this week.  I thought this week it would be real interesting to have Jill Meents from Bell Mortgage back in to talk about interest rates and refinancing on properties.  So welcome, Jill.

JILL:  Thank you.

STEVE:  Well, recently the interest rates have been dropping again, and I think we’re at probably a 30- or 40-year low for interest rates.  Jill, when does it make sense to refinance your home mortgage?

JILL:  Great question, Steve.  You know, there used to be the golden rule that you really needed to wait until your new interest rate was at least 2% below what your current rate is.  But that no longer holds.  So the first question I ask someone when they call is “What are we trying to accomplish?”  Are we trying to shorten up the interest rate term?  Are we trying to drop the interest rate?  Are we paying off other credit card debt or other debt? 

Are we trying to pay off a home equity credit line?  Are we trying to refinance out of an arm into a fixed rate?  Or are we trying to take cash out of the property?  And it just depends.

STEVE:  So Jill, what does it mean when you say you’re going to cash out?

JILL:  What I mean when I say in refinance where we’re going to take cash out, it just means that we’re going to be doing something with the proceeds of the new mortgage other than paying off the first mortgage and/or the second mortgage that was put on the property at the time you purchased it.  So as an example, you might have a home equity credit line that you put on your property after you purchased it. 

If I’m going to pay it off with the new refinance, technically, the lender considers that cash out.  Or perhaps you’re going to pull cash out of your home to pay off other credit card debt that has a higher interest rate and non-deductible interest.  Or perhaps you might even be looking to invest in other real estate, buying a second home or an investment property and you’re taking the cash from your primary home, pulling it out, and using it to make the new purchase.

STEVE:  So Jill, do people who refinance get the same rate as a new home purchaser does?

JILL:  Steve, in most circumstances, the interest rates on refinances are going to be a little bit higher than they are if you do a home purchase.  So in other words, if a borrower comes in to purchase a home, they’re going to get the best pricing.  The next best pricing is if we do what we call rate term refinance where I’m only paying off the current mortgage and perhaps financing their closing costs.  Then the next best rate would be if they are going to be cashing out of the property.

We talked about pulling cash out.  And then the last rate would be on an investment property.  If you’re either buying an investment property or refinancing an investment property, those rates tend to be about a half a percent to perhaps 5/8 of a percent higher.

STEVE:  Well, Jill, thanks for coming in today and maybe just finish up by explaining what are the advantages and disadvantages of using your current lender to get your property refinanced.

JILL:  Good question.  If you’re going to be using your current loan servicer, the good news is you know who they are and you probably have an 800 number on your monthly bill.  The challenging part is those large loan servicers are so doggone busy right now that they’re taking days and sometimes even weeks to return calls.  Many times, you don’t get the best pricing from them because they assume since you’re already a client that they don’t need to give you the most competitive financing.  So your rate might be a little bit higher. 

So it definitely pays to go back to the loan officer who originated your original loan or if you don’t know who that is or perhaps they’ve left the business, I’d love to talk to you.  And you can certainly reach me at 952-278-8731.

STEVE:  Thanks, Jill.