As mortgage rates drop, refinancing rises

For the 10th time in 11 weeks mortgage rates fell yesterday, reaching the lowest level in four decades - a trend that's driving many Long Island homeowners to seek refinancing.

At Bethpage Federal Credit Union, where refinancing has long made up at least 90 percent of its mortgages, calls are up 15 percent since June, and about a dozen people were hired last month to cope with the boom, said chief executive Kirk Kordeleski.

"The people that have jobs seem to be very confident that they're going to retain their jobs," he said. "They feel confident that they can maintain their mortgage payments, roll down their maturity, and they can set themselves up to be better financially."

Woodbury mortgage planner Warren Goldberg said refinancing business doubled to 40 percent in a year. Nationwide last week, 83 percent of mortgage applications were refinances, the highest in 20 months, the Mortgage Bankers Association said.

Signs at the Bethpage lender read "You can beat the heat but not these mortgage rates," and Marti Real walked to one last week to refinance her home. The Bayville resident has been cleared to fold her 30-year home loans with Bethpage - one at 5.5 percent and the other at 7.5 - into a 15-year loan of $237,000 at 3.75 percent. She'll still pay about $1,700 monthly, but estimated savings are $90,000 after closing costs (which are high in New York).

"When I retire, I want my house to be paid off," said Real, 57, a consultant for health products distributor Henry Schein.

Homeowners see dollars in their pockets as lending rates keep hitting record lows. This week, the interest on 30-year fixed-rate loans was 4.32 percent, said mortgage finance giant Freddie Mac.

Largely, borrowers ask for 30-year loans with no cashing out, they said, while a quarter or more want 15- or 10-year loans.

But refinancing won't be easy for many.

Most lenders won't do it for people with less than 20 percent equity, a problem with today's falling values, lenders and mortgage brokers said. On the Island, 7.4 percent of mortgage borrowers have no equity or less than 5 percent, said CoreLogic, a mortgage data tracker.

Also, many homeowners with two loans on the house find that the second-place lender will not agree to a refinance on the primary mortgage, even if it improves chances of the borrower's paying off the second loan, lenders and brokers said. Approval from the second-place lien holder is required because refinancing changes the risk and debt picture.

In Ronkonkoma, teacher Jim Meyer could save about $180 a month on his main loan, but his secondary, home equity lender hasn't said yes yet. His loan debt is about 87 percent of the value of his house, a loan-to-value ratio that scares lenders, who'd like to see less than 80 percent for refinancings.

"What bothers me is when I first got the home equity [loan], they knew it wasn't 80 percent and they weren't concerned," Meyer said.

Lenders worry about not getting fully paid, said Bob Walters, chief economist for major online lender Quicken Loans: "A lot of times, these second-lien holders are using this opportunity to hold you under the gun to pay them off."

People with credit scores of 740-plus get top rates, while those with scores under 720 should expect to pay points. Many lenders will reject those with less than a 620 score.