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8/28/2003, 2:28 pm

The Mortgage Bankers Association of America (MBA) has just reduced its previous forecast of $3.4 trillion in mortgage originations in 2003 to $3.2 trillion. And its 2004 forecast has been adjusted downward from $1.9 trillion to $1.5 trillion. The drop is due to the decline in refinancing activity.

It’s important to remember that if you have a mortgage with a high interest rate that you’ve not yet refinanced, you may still save yourself money by refinancing for a lower rate.

Wheatworks’ Home Buyer’s Calculator Suite can help you determine if refinancing might still be a good idea for you.

With the debt load that a lot of families carry, it’s tempting for them to exchange equity in their home for cash to pay down other debts riding on a higher interest rate. While that often makes good sense and can save you money, be careful.

In my opinion and if you can afford it, an ideal refi is one in which you only refinance the remaining balance on your current mortgage, retaining for yourself the equity in your home. Then as you make your payments on your new loan, pay the same monthly payment you were making on the previous mortgage.

For example, suppose your original mortgage of $100,000 was a 30 year conventional loan at 9.5%. Your current monthly payment of principal and interest (P&I) is $840.85 and after 5 years your balance is $96,162.39. If you refinance the $96,162.39 at 6.5% for 30 years your new monthly payment will be $607.81 (P&I), a monthly savings of $233.03. While the extra cash each month would be nice, remember that you’re accustomed to $840.85 … so if you can afford it, keep at it.

By paying the same payment on your new loan, in this instance you would pay off your new 360 month mortgage loan in 179 months (less than 15 years) and save $68,422.06 in interest by paying it off early.

What did I use for all the calculations? One thing: Home Buyer’s Calculator Suite … check it out by downloading the fully-functional evaluation version!

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