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Can you still refinance?
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October 8, 2001: 7:00 a.m. ET
With bank lending rates near record lows, it may be time for a refi.
By Judy Feldman
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NEW YORK (CNNmoney) - The low cost of borrowing these days has made home mortgage refinancing an enticing option.
The Federal Reserve slashed rates nine times since January, and the latest cut on Oct. 2 brought overnight lending rates to their lowest level in nearly 40 years. Such cuts do not have an immediate impact on long-term mortgage rates. But they do trickle down.
As of Oct. 5, the benchmark 30-year fixed rate mortgage averaged 6.64 percent, down more than a point from a year earlier and the lowest level since Oct. 1998.
But refinancing does not always pay. Indeed, it can cost homeowners thousands in fees for appraisals, attorney's fees, and possibly even points.
Whether it's a good move for you depends on whether your situation fits one of the following scenarios:
You're paying a high rate or want more security The most obvious refi candidates are homeowners paying more than 8 percent - which could be the case if you bought between January and June 2000 or missed the 1998 refinancing boom.
It was once assumed that anyone with an adjustable-rate mortgage (ARM) should refinance when fixed-rates fell to 7 percent or less. Roughly one-third of borrowers took out an ARM in 2000, when fixed rates were high for much of the year.
But Keith Gumbinger, vice president of mortgage tracker HSH Associates, said that decision is "no longer a no-brainer."
Last year and in early 2001, when one-year ARMs averaged more than 7 percent, refinancing to a fixed-rate mortgage was a clear win. But as of Oct. 5, they averaged just 5.34 percent - a favorable rate by anyone's definition.
You have a jumbo loan Rates on jumbo mortgages, or those that exceed $275,000, run about three-eighths of a percentage point higher than normal rates, or those for conforming loans. So it can pay to refinance once the amount you owe shrinks to the cutoff for a conforming loan.
You want to be out of debt faster Refinancing isn't always about cutting your monthly bills. Low mortgage rates also create an opportunity for borrowers to shorten their loan terms. Say you took out a 30-year fixed-rate mortgage in August 2000 at 8.5 percent. If you refinance to a 15-year fixed mortgage at the going rate of 6.11 percent, you'd owe a little more each month -- but over the life of your loan you'd save considerably on interest payments.
You're paying for private mortgage insurance (PMI) If the equity in your home is less than 20 percent of the original purchase price, private mortgage insurance is required. But even if you've crossed that threshold, you can't cancel PMI unless your payment history is blemish-free and -- in many instances -- you've been in your home at least two years. Refinancing is a way to sidestep those hurdles by working out a brand-new deal: A new mortgage could save you between $35 to $150 a month in insurance payments, Gumbinger says.
You have other high-rate debt Mortgage debt carries some of the lowest rates available, and the interest is tax-deductible. So if you have untapped equity in your home, you may want to opt for a cash-out refi -- a larger mortgage than you currently have -- to pay off higher-rate loans including credit cards.
For tools and other resources to help you take the next step, see our Your Home page. Our refinancing calculator, for example, estimates how much you'll save -- and how long you'll need to stay in your home to recoup your refinancing costs. Before making a move, though, check with your current lender, which may be willing to cut your rate faster and with less paperwork.
Remember, too, the window for optimal refinancing is not always open. Gumbinger anticipates that refinancing may become a less attractive option two months to a year from now if the economy picks up steam and rates start to climb. His advice? "When you find the rate you like, lock it in. Mortgage rates are notoriously fickle." 
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