First American CoreLogic's latest study concludes that homeowners saved billions of dollars in 2009 by refinancing their home loans. Is it time for you to join those who have saved big with a mortgage refinance? Check out the possibilities before it's too late.

Top Refinancing Tips: Five Signs It's Time to Refinance Now

A new study by mortgage analysts at First American CoreLogic calculated the level of debt reduction and the money saved by refinancing homeowners. The report estimates that homeowners who refinanced between January and June of 2009 will receive $2.3 billion in savings. Median monthly savings per mortgage was $120, which means the median borrower who refinanced will pay 10.5% less than their former monthly payment. All told, the total benefit over the next five years to homeowners who refinanced in 2009 is expected to be $11.5 billion.

Should You Refinance Your Mortgage? Top Five Considerations

With seemingly everyone jumping on the refinance bandwagon, you may want to ask yourself if you should do the same. Here are five questions to ask yourself to determine if that's the case.

1. Are you taking credit? For your improved credit history, that is. If your current mortgage is a subprime or Alt-A home loan, chances are your rate is at least 3% higher than it could be. If your credit has improved enough to get an FHA, Fannie Mae, or Freddie Mac refinance, your mortgage rate and payment could plunge. If you have paid your bills on time for the last 12 months and it's been at least two years since a bankruptcy or three since a foreclosure, your credit may be good enough for a mortgage refinance. Document your income, get a few mortgage rate quotes, and see where you stand.
2. Did you go big with your current mortgage? If you bought or refinanced your home with a jumbo mortgage in the last few years, you may be able to save today by refinancing into a "jumbo-conforming" or FHA home loan now. For 2010, government increases to amounts allowable under FHA, Fannie Mae, or Freddie Mac guidelines may allow you to qualify for less expensive financing, depending on the location of your property. See Fannie Mae's "jumbo-conforming" mortgage limits or find FHA high-cost limits--maybe you can shave your current interest rate.
3. Has your mortgage passed the terrible twos? If your mortgage is two or more years old, you could take advantage of significant savings. The average 30-year mortgage rates in 2007 were over 6%, and they were higher than that in 2006. Rates are under 5% today. Contact mortgage lenders, snag a few interest rate quotes, and run some numbers through a mortgage calculator. See how long it would take for your savings to recoup the costs of refinancing, and go for it if you plan to stay in your home at least that long.
4. You're ARMed (and dangerous)! If you have an adjustable-rate mortgage (ARM) today, you are probably loving it. Many homeowners pay 4% or even less, and will as long as the Federal Reserve uses its influence to keep short-term interest rates low. However, all good things must come to an end, and if you plan to keep your home for more than a couple of years, you may want to take advantage of today's low rates and fix your mortgage rate for 5 years (at about 4%) or 30 years (at about 5%).
5. You think 2010 isn't going to be your year. It's a sad joke, but unfortunately true: banks prefer to lend money when you don't need it. If you have reason to believe that next year may hand you a job loss, income reduction, or increase in expenses, sooner is better than later for refinancing. FHA lets you cash out up to 85% of your home's value and refinance up to 96.5%. Stretching out your current mortgage balance over a new 30- or 40-year term could also give you some breathing room.

Even a Caveman Can Do It: The No-Brainer Refinance

If you can get a true no-cost refinance--where the lender absorbs all of the costs in exchange for you accepting a slightly higher interest rate--and the new rate is lower than that of your current mortgage, you should refinance. In this case, even a few bucks a month saved is free money, and there is no break-even period--the perfect mortgage for commitment-phobes!

About The Author

Gina Pogol has been writing about mortgage and finance since 1994. In addition to a decade in mortgage lending, she has worked as a business credit systems consultant for Experian and as an accountant for Deloitte. She graduated with High Distinction from the University of Nevada with a BS in Financial Management.