Local News

Tight economy produces surge in refinancing

Posted January 21, 2009 5:58 p.m. EST
Updated March 9, 2009 5:12 p.m. EDT

— Homeowners looking to cut their monthly expenses are refinancing their mortgages to take advantage of low interest rates.

Mike Pearce, a mortgage banker with 22 years of experience, said the sluggish economy has created a refinance boom.

"The length of it could be one of the longer ones," Pearce said. "If you want to pay a 1 percent fee, you can get a lower rate."

A homeowner who lowers his or her interest rate by 1 percent on a $200,000 mortgage will save more than $125 a month, he said.

"When you can save $100 (to) $150 a month and the costs are minimal, or you roll the cost in (with the refinance total), it's a benefit," he said.

Raleigh homeowner Jim Dzengeleski said his mortgage company projects he can save upwards of $300 a month by refinancing. That savings would help his wallet, he said, noting the recession has crimped his spending.

"I cut back on a lot of the things I do – going out, buying certain things around the house," Dzengeleski said.

Pearce said the two primary restrictions on refinancing are that the homeowner must have good credit and the home must be worth more than what is owed on it. That could preclude a number of homes and homeowners affected by the housing bubble burst and the subsequent rise in foreclosures.

To encourage more buying and less refinancing, homebuilders have lobbied the government to offer incentives to people who buy new homes. They also want the government to lower mortgage rates even further on purchases of new homes.