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WHEN AND WHERE TO REFINANCE MORTGAGE
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WHEN AND WHERE TO REFINANCE MORTGAGE

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Q. I've been reading that home loan interest rates are at or near 20-year lows. My wife and I are debating whether it's worthwhile to refinance. Our mortgage is at 8 percent fixed. Is the criteria still a 2 percent reduction to make refinancing profitable? If we refinance, should we get a fixed or adjustable? Should we go to a mortgage broker or a bank? We hate our current lender, a major bank, so refinancing is a major incentive to get rid of our nasty lender -- Barry T.

A. Forget the old 2 percent refinancing rule. Today, if you can save as little as one-half percent interest on a fixed-rate mortgage, it pays to refinance your home loan. Since loan fees on a refinanced home loan can only be deducted over the life of the mortgage (loan fees on a home acquisition mortgage are fully deductible in the year of home purchase), shop for a so-called no-cost mortgage. You'll pay a slightly higher interest rate, but it will include most of your upfront loan fees.Most refinancers are obtaining fixed rate mortgages around 7 percent today. Your monthly payment should drop substantially. The small difference between adjustables and fixed rate loans does make the adjustable rate risk worthwhile.

Compare mortgage brokers, mortgage bankers, and direct lenders such as banks and S&Ls. Recommendations from friends who recently refinanced and were satisfied are extremely important. Be wary of lenders who quote very low interest rates but can't deliver. Ask each lender for the loan's APR (annual percentage rate), which includes loan fees so you can compare each loan offered.

Q. We lease a house at a bargain rent, but our landlord is having financial troubles. We were notified that the house is in foreclosure. Does this mean our lease will be wiped out by the foreclosure and we'll have to move?

A. The answer depends on the date of your lease. If it was signed before the house mortgage was recorded, foreclosure won't wipe out your lease. Of course, a month-to-month rental agreement would be wiped out by foreclosure regardless of its date. More likely, the mortgage predates your lease, so a foreclosure sale can wipe out junior encumbrances such as your lease. This is critical in commercial property foreclosures, but rarely is it an issue in residence foreclosures.

Be careful to whom you pay the rent. I recall when I was a law student at the University of California, Hastings College of the Law, in San Francisco, our apartment building went into foreclosure. The landlord, the foreclosing lender and an imposter all tried to collect our rent. My two roommates and I decided we shouldn't pay anyone until they proved legal ownership. You should be careful, too.

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