The 3 Kinds of Homeowners Who Can Still Refinance

NEW YORK (TheStreet) — By now most homeowners know that the refinance ship has sailed. Or has it?

For those whose circumstances have recently changed there may still be a chance to get a better mortgage deal. A homeowner whose credit score has improved, for instance, might now be able to get a low enough rate to make the refinance arithmetic work, as could one whose income has risen significantly or one who has given up self-employment to work for a stable firm.

Refinancing was big business in recent years, as homeowners took out new mortgages to pay off older ones charging higher rates. In fact, refinance business kept mortgage lenders afloat in the years the housing market was in the dumps. But a rise in rates over the past year or so has taken the profit out of refinancing, as a new loan probably won't save you enough to offset the costs of getting it. Indeed, it may not save you anything.

But that assumes an apples-to-apples situation, which may not be the case. 

Read More: 'Lock-In Effect' Looms as Rising Mortgage Rates Bring Lower Sales

Credit scores are based on the individual's history, the most important factors being the track record of paying bills on time. A good history in the past year or 18 months can help overcome the damage from late payments or defaults further back, allowing the applicant to get a lower mortgage rate.

On his website,, Jack M. Guttentag, emeritus professor of finance at the Wharton School, says a person with a good credit history can raise a score from 620 to 660 in 18 months. That could induce a lender to reduce the applicant's mortgage rate by about 0.375 percentage points, from 4.625% to 4.25%, for example. If the homeowner had an older mortgage charging 5% or 5.25%, this extra saving from an improved credit score might be enough to tip the balance and make refinancing pay. That would be more likely, of course, if the homeowner expected to have the new loan for many years, allowing the monthly savings to offset the various refinancing fees.

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