Interest rate isn't only factor to consider when weighing refinancing deals

July 19, 1992|By Los Angeles Times

Q: Last September I refinanced my condo to get a lower interest rate, from 9.25 percent to an 8.75 percent fixed rate, and some much-needed cash. Now my mortgage broker is offering me other re-fi deals that sound interesting. The first is an 8.625 percent fixed loan for 30 years; the other is a 6.25 percent adjustable that I can convert to a fixed, 20-year loan in one year. The deal carries no points, but the fees would total $2,000, the same amount I paid last year. I should also add that my current loan, for $185,000, runs for only five years; I must refinance it in 1996. Am I smart to grab the lower rates now or should I take my chances on the future?

A: This is a tough call. If you weren't obligated to refinance your loan anyway by 1995, there would be no question but that the deals you're being offered are terrible. But given your situation, someone could make a case that the additional $2,000 in fees you will be forced to pay for the second time in a year could be an acceptable price for the security and peace of mind you are apparently seeking.

However, Morrie Reiff, a Los Angeles financial planner, isn't one of those about to make that case. He says you would be foolish to jump now to grab a fixed mortgage that is just 0.125 of a point lower than what you are locked into paying for the next four years.

For starters, interest rates are volatile now and could head lower. A better deal could be around the corner. But you also should think about how long you are going to live in your condo. If you are likely to move before you must refinance in 1996, it makes no sense to refinance. Your current 8.75 percent mortgage rate is a terrific deal. However, if you are likely to be in your condo past 1996, be on the lookout for a re-fi.

Mr. Reiff recommends that you find another mortgage broker. He says anyone who would sell you a five-year loan with no guaranteed refinancing package at the end of the loan may be preying on your naivete.

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