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Should you refinance your mortgage?

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With mortgage rates at historic lows, it has many people thinking about refinancing. Cutting your mortgage payment down sounds like a good idea, but, refinancing is not for everybody.  

A 30-year fixed rate right now is about 3.5 percent.  A 15-year fixed rate is 2.75 percent. Do you get in there and take advantage of that so that you can lower your mortgage payment? Perhaps, but to qualify you'll still need a steady income, good home value and great credit.

According to Bankrate.com, you can't qualify for the low rates unless your credit score is high -- in the 700 range.  This is the perfect example of why you have to work to get your score up. If you have a conventional loan, in order to refinance, your home needs to have about 20 percent equity. You cannot owe more than the home is worth.

Refinancing saves you money on your monthly payment, but be aware that you have to pay closing costs.  It's no deal if you don't stay in the house long enough to recover those costs, so do some math and figure out how many months of lower payments it will take to make up your closing costs.

If you owe more than what your home is worth, you do have some options if your loan is owned by Fannie Mae or Freddie Mac. There is a program called HARP -- the Home Affordable Refinance Program.  You still have to have decent credit and a steady job history, but they'll work with you. Go here for more details -- www.knowyouroptions.com

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