often by hundreds of dollars.” data-reactid=”32″ type=”text”>Today’s lowest mortgage rates of all time have set off a stampede among homeowners who’ve realized they can refinance their loans and cut down their monthly payments, often by hundreds of dollars.
But if you’re thinking of joining the rush to refi, personal finance author and TV personality Suze Orman wants you to pause and take a deep breath — so you won’t bungle it.
“It makes me so crazy how most homeowners make a huge mistake when they refinance,” she says.
mortgage rate your friends will envy.” data-reactid=”35″ type=”text”>It’s a blunder Orman says can easily saddle you with much higher interest costs, even if you manage to land a mortgage rate your friends will envy.
‘So very wrong’
plunged to record lows in 2020 as the coronavirus crisis has rattled investors and caused the Fed to slash interest rates nearly to zero to prop up the economy.” data-reactid=”41″ type=”text”>Mortgage rates have plunged to record lows in 2020 as the coronavirus crisis has rattled investors and caused the Fed to slash interest rates nearly to zero to prop up the economy.
Low rates prompted nearly 1.7 million homeowners to refinance during this year’s April-through-June quarter alone — more than double the number who took out fresh loans during the same period in 2019, according to Attom Data Solutions.
Orman says the costly mistake most of those recent refinancers probably made was to automatically reach for another 30-year mortgage, even if they’d been paying down their existing 30-year loan for several years.
“This is so very wrong,” she writes, in her blog.
The personal finance guru says suppose you’d been paying down your original loan for 14 years, then took out a new 30-year mortgage. “Sure, the new mortgage is at a lower interest rate, but you just extended your mortgage-payment on this home to 44 years!” she says.