Although a refinance with closing costs made sense for Lyons, McBride says consumers who continually raid the piggy bank to pay for such costs should think twice before opting for another refinance, since they're increasing their balance with each refinance as opposed to knocking it down.
Also, what a homeowner will be charged at the closing table can be rather high, as closing costs vary depending on jurisdiction, says Frank Donnelly, a certified financial planner and president of the MBA of metropolitan Washington, D.C.
Despite such concerns, many repeat refinancers are capitalizing on today's record-low interest rates. However, the heyday may not last much longer, according to Fratantoni. The MBA projects rates will drift up in 2013, with 30-year rate rising above 4 percent by the middle of next year, which will curtail retail volume. But with interest rates currently hovering around 3.5 percent, now is an opportune time for many to refinance—so long as they land their best offer.
Should you consider a refinance? Russ Anderson, centralized sales executive for Bank of America, recommends consumers explore their options and prepare themselves for the refinance process. He says people looking to refinance should pick a lender they trust and go into the loan debate knowing what they're trying to accomplish.
Barry Zigas, director of housing policy at the Consumer Federation of America, says consumers shouldn't rush into a refinance. They should be aware the rate the lender advertises isn't necessarily the rate they'll be offered—that depends on a number of factors, such as the applicant's credit score, their home's appraisal, and what percentage of their income is paying off other debts.
McBride says homeowners should get quotes and good-faith estimates from at least three lenders so they can compare offers and zero in on the best deal. Some experts say consumers who qualify for a fixed-rate mortgage that drops their interest rate by at least 1 percent should strongly consider refinancing.
The agreement's terms and the application process, however, may contain some deterrents. The time-consuming paperwork can frustrate homeowners, as the documentation demands are more stringent now than they've been in the past. "I've heard about people who, just in the middle of the process, said, 'I give up. It's just not worth it,' says Donnelly.
Applicants must provide up-to-date paystubs, bank statements, and W2s. If the process takes more than 90 days, the homeowner may have to update his or her credit report. In some cases, if a person's credit score has decreased over that time period, the lender may want to charge a higher interest rate than the initial offer. After 120 days, the appraiser may have to survey the property again. And the loan processing time can be taxing: On average, it takes 54 days to close, according to a report released this month by Ellie Mae, a company that tracks the residential mortgage industry.
Nonetheless, the appeal of record-low interest rates has cultivated a mortgage realm flooded with serial refinancers. Says Donnelly: "I tell people, 'It's like having a baby. Once the baby is there, you forget about all the labor.'"