Refinancing Savings

A homeowner with a 30-year mortgage at 5.5 percent pays $567.79 in principal and interest but could replace that with a 20-year mortgage now priced at 3.75 percent and pay principal and interest of $592.89. The extra $25 a month will pay off the house 10 years faster at today's lower rates, according to figures prepared by Mortgage South.

After watching for two years, Jennifer Garrison knew Thursday afternoon was the time to act.

Her 6.125 percent mortgage rate was a good deal back in 2002 when she bought her Cleveland, Tenn., home, but as the stock market shot up and down this week, mortgage rates declined to historic lows.

The dental hygienist got a call from her broker Thursday saying that she could lock in a 3.875 percent rate, consolidate her two mortgages and pay $100 less each month.

"I couldn't celebrate too much because I had a patient sitting in the chair," she said. "All I could do was get up from my patient and say, 'Yes, lock it in.'"

With a son about to transfer to an out-of-state college, the extra savings will be a help, she said, and when considering business growth in the area and her steady job, she's not worried about the economy or the stock market.

"It's up and down all the time and you just can't worry about it," she said. "I hate to say I'm glad the stock market went down, but it helped."

Freddie Mac said Thursday that the average rate for the 30-year fixed mortgage fell to 4.32 percent this week from 4.39 percent. The 30-year loan hit a record low of 4.17 percent in mid-November.

The average rate on a 15-year fixed mortgage, a popular refinancing option, fell to a record low of 3.50 percent, from last week's record rate of 3.54 percent.

"I've been in this business 25 years and these are some of the best rates I've ever seen, so I expect we'll see a lot of people trying to take advantage of these rates by refinancing their mortgages," said Don Oakes, president of Mortgage South.

Greg McBride, a senior financial analyst for Bank Rate Monitor, said economic concerns proved more important than the downgrade of U.S. Treasurys by Standard and Poor's. As a result, investors concerned about the stock market bought bonds and pushed down mortgage rates.

"From a refinancing sense, it's a tremendous opportunity and one that many homeowners are jumping at the chance to use," McBride said. "But what it's not going to do is lead to a surge in home purchases because as great as these rates are for homebuyers, people are still hesitant due to concerns about the economy and the job market."

Tina Christein, Chattanooga branch manager of the Brentwood-based Churchill Mortgage where Garrison refinanced, said the homeowner is one of many calling to get better rates. In the past week, she's seen about a 25 percent increase in phone calls.

"People are afraid they're going to miss out," said Christein, who has about 17 years of experience in the business. "I would say this is an historic low."

Christein said that about eight months ago, rates were approaching lows similar to this week, but several home-owners pushed their luck a little too hard.

"They think, 'Maybe they'll drop a little more, I'll wait,' then they wait too long," she said.

These new low rates are encouraging some new home buyers as well, Christein said.

"People are looking feverishly now," she said. "They want to have a house contract before they lock in, so I think it's making people get out there and look a little quicker."