Homeowners opt to refinance and save

The reasons to refinance your home, or buy a new one, just keep getting better.

This week, the Federal Reserve announced it will spend up to $300 billion over the next six months to buy long-term government bonds, a new step aimed at lifting the country out of recession by lowering rates on mortgages and other consumer debt. It also left the short-term bank lending rate at a record low of between zero and 0.25 percent.

Those announcements have the phones ringing at local banks with people now locking into rates.

"If you can save a point on your mortgage, it's time to do it," said Andrew Siders, president of Vista Bank. "Things are moving."

The anticipation of lower interest rates, coupled with a better week on the stock market, is raising optimism, Siders said. "As government gets more positive, the consumer is going to get more positive."

David Stinson, an agent with Meybohm Realtors in Aiken, agreed. Two large investors approached him this week ready to buy because they believe it's the right time to make a move. And he's anticipating that this spring, more people will be buying.

The Aiken market has been slowed because many newcomers were waiting to sell their homes in other areas. Just recently, he's seeing loans come together that a few months ago wouldn't have happened.

The announcements were the extra spark people have been waiting on to refinance, said Joe Lewis, the Aiken market president of Savannah River Banking Company.

If a homeowner has a 6 or 6.5 percent rate now, reducing that to 4.5 or 4.75 percent "frees up a lot of money every month which gives them extra money to go out and buy cars, buy appliances," Lewis said.

Every dollar spent improves the economy and helps with the recession recovery.

But, the days of no down-payment required or weak credit ratings being overlooked are over. Mortgage underwriting guidelines have gotten tougher.

Today, the best rates will only go to borrows with good credit scores, Lewis said. People with marginal scores will pay higher rates.

Borrowers wanting to purchase or refinance very expensive homes may not get the best rates, Lewis said. The underwriting guidelines for conventional loans apply to loans up to $417,000.

Fewer investors want to hold big mortgages so those loans are harder to get and usually carry a higher interest rate, Lewis said.

What a difference a rate can make.

The chart shows the difference in the monthly payment on loans of different amounts, interest rates and length. Rates do not include escrow payments.

$150,000 mortgage

30 year fixed

6.5% - $948.10

4.5% - $760.03

15 year fixed

6.5% - $1306.66

4.5% - $1147.49

$200,000 mortgage

30 year fixed

6.5% - $1,264.14

4.5% - $1,013.37

15 year fixed

6.5% - $1,742.21

4.5% - $1,529.99

$300,000 mortgage

30 year fixed

6.5% - $1,896.20

4.5% - $1,520.06

15 year fixed

6.5% - $2,613.32

4.5% - $2,294.98