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Ask Dr. Don

Should a retired couple refinance?

Dear Dr. Don,
We are a retired couple over 65 years old and have a mortgage loan from an individual.  The loan balance is about $42,000 at 10 percent interest, with 17 years remaining on the loan. 

Having retired this year we only receive Social Security and a small retirement check to live on.  Should we refinance to get a lower interest rate, with no cash out, to lower our monthly payments?  We filed for bankruptcy seven years ago, but our credit has been excellent ever since.
Mary Mortgage

Dear Mary,
Start off by requesting a copy of your credit report and your credit score.  You'll have a better sense of where you stand when applying for a new mortgage loan. You can order your Equifax credit report and Beacon score on Bankrate's Shop & Save channel or use one of the other consumer reporting agencies.

As I write this, the national average for 15-year fixed-rate mortgages is about 6.30 percent. 

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With your credit history you're unlikely to get this low a rate, but even refinancing at 8 percent can result in substantial savings as shown in the table below:


Existing mortgage



Loan amount




Interest rate




Loan term (months)








Total payments




Total interest




(Estimates from information provided.)

If your credit scores come in at a level where you feel comfortable applying for a mortgage, then you can start shopping lenders in your area using Bankrate's mortgage search

Before you fill out your first mortgage application, take the time to read "Don't get burned in the refi frenzy." Don't forget to review your current loan document to make sure that there's not a prepayment penalty. 

Your current lender may be willing to lower your interest rate rather than to lose the loan.  This could be a lot less expensive than closing on a refinancing with a new lender. 

Before you start discussing this with your current lender, it's worth the time and effort to get a loan approval and terms from another lender so you've got some negotiating leverage when you talk to your current lender. 

Finally, use Bankrate's Refinancing Calculator to determine how many months it will take to recover your closing costs.

-- Posted: June 6, 2002

Read more Dr. Don columns
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See Also
When NOT to refinance
Check latest rates
Don't get burned in the refi frenzy
More Dr. Don stories

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