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It’s never too late to refinance

The steep drop in mortgage rates from 2007 to 2013 brought many people with relatively new mortgages a great opportunity to refinance. For people with older mortgages, though, is there a point at which it just isn't worth refinancing?

This question may face people who have taken several years to work through obstacles to refinancing, such as reduced property values and damaged credit histories. By the time they work through those issues, here are some of the factors that will affect refinancing:

The interest rate opportunity. According to the mortgage information website HSH.com, mortgage rates are now more than a full percentage point higher than they were earlier this year. However, weekly fluctuations, like last week, for example, brought mortgage rates down to multi-month lows. Even so, there still may be plenty of opportunity for people with older mortgages who have been unable to qualify for refinancing until now. Consider that just five years ago, 30-year mortgage rates were 2 percent higher than they are today, and over the past 30 years, rates have been as much as 10 percent higher.

Shortening a loan. What adds to the opportunity for people with older mortgages is the opportunity to refinance to a shorter loan, which typically means a lower interest rate. Someone 15 years into a 30-year mortgage may want to refinance to a 15-year mortgage, since rates on those are running nearly a full percentage point below 30-year rates.

The diminishing interest component. When you get down to the last few years of a mortgage, the best argument against refinancing is that most of your payments at that point are loan principal, so there is little to be saved even if you reduce your interest rate.

Refinancing often boils down to mathematics, and those numbers are very much dependent on your individual situation. While you should be aware of broad refinancing trends, such as what mortgage rates are doing, you should also periodically check the particulars of your situation to see if a specific refinancing opportunity has arisen.

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