A new study by First American CoreLogic predicted that refinancing will result in $2.3 billion in savings for those who refinanced during the first six months of 2009. According to the study, the median individual monthly savings was $120, 10.5% less than the previous mortgage payment. The total benefit over the next five years to homeowners who refinanced in 2009 should grow to $11.5 billion. Should you join these people and save some money?

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Time to Refinance? Check These Five Signs

  1. You Stinky Credit Got Less Stinky
    If you have a sub-prime, bad credit, or Alt-A mortgage, and your credit is now good enough to qualify for an FHA or conventional mortgage, you could decrease your interest rate by several percentage points. Have you made your monthly payments on time for the last 12 months? Can you document sufficient income? Has at least two years passed since a bankruptcy or three since a foreclosure? Then you really should refinance if possible.
  2. Your Mortgage Is Huge
    If you took out a jumbo mortgage about two years ago, you may be able to refinance into a conventional or FHA home loan now and save a lot. Temporary government-mandated increases to loan amounts under FHA, Fannie Mae, and Freddie Mac guidelines may mean that you can qualify for better interest rates if live in a higher cost area. Check Fannie Mae's "jumbo-conforming" mortgage limits and FHA high-cost limts to see if you can't get a better deal.
  3. Your Mortgage Has Hit the Terrible Twos
    If your home loan is two or more years old, chances are you could get a lower interest rate. Average 30-year fixed-rate mortgage rates in 2007 were more than 6%; they are less than 5% today. Get several interest rate quotes and use a mortgage calculator to see if your monthly savings could make up the costs of refinancing within a few years.
  4. Your ARM Needs Fixing
    If you have an adjustable rate mortgage (ARM), you are probably doing a happy dance these days because short-term interest rates are very low. However, all good things must come to an end, and if you plan on keeping your home and your mortgage for many years, expect interest rates to rise. You may want to take advantage of today's low rates and fix your mortgage.
  5. 2010 Looks Scary
    Everyone knows it's easier to get a mortgage or any kind of loan when you don't need one. So if you think you may need a lower payment or some extra cash next year, sooner is better than later. FHA allows cash-out refinancing to 85% of the home's value and refinancing to 96.5%.

The No-Brainer Refinance Decision

Check out a no-cost refinance. If the rate is better than what you're paying now, the decision to refinance is easy (free money!). Even the commitment-phobic can relax--there is no breakeven period because there are no costs.