Cash-in refinances getting more popular

MONEY-SAVING MOMENT: I really wrestled with playing the money-saving sounder for this tip because what I’m about to discuss may be a bridge too far for some people.

Yet I’m of the mind that you need to do whatever you have to in order to get a refinance done today, especially on 15-year refis and 5/1 ARMs.

If you’re talking about the latter, the rates on 5/1 ARMs are down in the 2s right now.

On 15-year refis, the rate spread between 15 and 30 year mortgages is the largest ever on record since recordkeeping began. Today, a typical 15-year refi is 3.6%. A 30-year mortgage rate is 4.5%. (The normal spread between those loans is usually a third of an interest point to six-tenths of an interest point. But right now, that spread is more than eight-tenths.)

However, despite these amazing market conditions, the problem for most people is that either their homes won’t appraise out or their credit won’t permit them to do a refi.

But if you are within shouting distance of a refi, you need to get the job done.

Bloomberg reports 1 in 3 people are now doing 15-year refis. BusinessWeek, meanwhile, reports that almost half of all refinance activity in the country right now is of the cash-in variety. This is one case where I think you should even consider borrowing from a 401(K) to come up with money to do a refi!