Savings can follow lower interest rate

You may be one of those people who has thought about refinancing your mortgage but never got around to it.

If so, your procrastination has cost you -- probably dearly. Reducing the interest rate on a mortgage usually means substantial savings every month.

In summer 2003, home loan rates descended to one of the lowest points in decades, touching off a rush to lenders' offices.

Mortgage rates remain relatively low, but many people are still sitting on the sidelines, seemingly oblivious to the potential savings.

Granted, some homeowners have legitimate reasons to avoid refinancing, such as a financial setback that disqualifies them from taking out a new home loan. Others are simply frightened by the process. ''A portion of the population is intimidated by the complexities of mortgage refinancing. They're afraid to open that black bag of personal finances to look inside,'' says Keith Gumbinger, a vice president at HSH Associates, a New Jersey firm that tracks mortgage markets throughout the country.

Here are several pointers on unraveling the mysteries of mortgage refinance: • Look into your credit picture before starting the refinance process. Some homeowners' efforts to refinance have been rebuffed because their household income has declined.

Another factor limiting mortgage market access involves what Gumbinger terms ''a severe deterioration of credit.'' This could result from a default on a student loan or hospital bills.

The most common indicators of credit worthiness used by mortgage lenders are ''credit scores.'' Scores typically range from 300 and 850, Gumbinger says, and if you rank near the bottom, it can severely hinder your chance of refinancing to a lower rate.

Still, Gumbinger notes that many homeowners with a few credit blemishes are surprised that their scores are higher than they thought.

A recent federal law gives consumers free access to credit reports on a yearly basis, though some states are not yet covered. (Floridians become eligible in June.) Alternatively, you can purchase credit score information through the three major credit bureaus (TransUnion, Experian or Equifax) or by going to the website of Fair Isaac Corp. (www.myfico.com).

• Shop for lender quality as well as good rates. Some homeowners are comfortable using a lender from a faraway state that they've found through the Internet. But Gumbinger says those who are anxious about the process are often more at ease with a nearby lender.

''Rates are pretty uniform. So you're not necessarily going to get a better deal through a lender thousands of miles away,'' Gumbinger says.

One obvious way to search for a customer-friendly lender is to ask friends, neighbors or work associates.

• Use online resources for comparison shopping on rates and type of loans. Nowadays there's no need to rely on the lender to give you the data you need to compare different mortgage options. You can use online calculators to adjust for different factors, including the amount borrowed and the full term (duration) of the loan.

One of many websites offering free online calculators is that of HSH Associates (www.hsh.com). Through this firm, you can also buy the results of a comprehensive weekly survey of mortgage rates available through lenders that serve your state.

• Never give away your power as a mortgage refinance customer. Homeowners with the income and credit standing to qualify for the best available market rates on a mortgage refinancing should expect lenders to compete for their business and treat them well, Gumbinger says.

As an extra measure of caution, he advocates asking for all lender promises on rates and fees to be put in writing when you apply for the loan. Also, he says refinance applicants shouldn't be required to provide an upfront deposit for a mortgage application.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.