When Dr. Claudio Levin built his French country-style house five years ago, he took an 11.5 percent mortgage. When he refinanced last summer, his rate was reduced to 9 percent. Now he's refinancing again, and his rate is down to 7.5 percent.
"It's easy," said Dr. Levin, a Reisterstown internist. "It's no hassle. And I don't have to lay out any cash."
Like Dr. Levin, thousands of American homeowners have found it worthwhile to go through the mortgage refinance pipeline once, twice or even three times during the past 18 months to cut their monthly payments or shorten the term of their loans.
That means more business than ever for banks, S&Ls and the burgeoning array of mortgage banking firms that seek to capture a piece of the gigantic refinance market through newspaper ads, TV commercials, direct-mail campaigns and even telemarketing.
Until recently, conventional wisdom had it that homeowners didn't stand to benefit from a mortgage refinance unless they could cut their mortgage rate by 2 percent, stay in the house at least two more years and spend less than $2,000 in closing costs on the new mortgage.
Some mortgage specialists question whether the so-called "2-2-2 rule" ever applied. But certainly it no longer does, they say, because of the availability of low-cost or no-cost refinance programs.
"All that's out the window," said Keith Gumbinger, a vice president at HSH Associates, a New Jersey firm that tracks the mortgage market.
"It doesn't make any sense to look at the old rules of thumb because they simply do not apply."
"It can make sense to refinance for as little as a quarter-point if you can do it with no cost, or be in the home long enough to more than recoup your costs," Mr. Gumbinger said. Even short-timers with relatively low rates could benefit, he said.
He gives this example: A homeowner has a $140,000 fixed-rate, 30-year mortgage at 7.5 percent that he took out late last year when he refinanced. He plans to move to another state in just a year. He has the opportunity to take out another 30-year mortgage -- this time a no-cost adjustable with a first-year rate of just 4 5/8 percent. In doing so, he cuts his payments by nearly $260 a month.
Of the $3 trillion in mortgage debt now outstanding in the United States, one-third is at interest rates of 8 percent or above, reports the Mortgage Bankers Association of America, the Washington-based trade group.
