interest rates are simply incredible on mortgages right now. It’s not uncommon to see 30 year rates down in low fours and 15 year rates in the threes. Week after week, the rates keep dropping. Yet, surprisingly, no one is coming to the table.

a big part of the reason there’s not a lot of refinance activity has been appraisal shock. People who actually want to do a refi can’t because foreclosures and shortsales have lowered their home values. so they’ll go to refi and their lender tells them they can’t appraise out. Disappointed, they’ll go away and tell their friends about all the paperwork hoops they had to jump through just to be turned down…further deterring other people from wanting to refi!

so what’s a person to do? Well, you’ll probably have to pay down your mortgage if you want today’s sweet mortgage refi rates.

This is one time when you might actually consider borrowing from your 401(k) if that’s the only source of funds you have to draw on. if you can lock in for 30 years at 4.25% or 3.875% on a 15-year refi (sample rates if your credit is good), well, that’s amazing. sure, borrowing from your 401(k) means you pay pre-tax money with after-tax dollars that will taxed again at retirement…but it might be worth it for the low rates!

Here’s another solution: if you have a life insurance policy that’s been gathering dust, you might consider borrowing against it (if it’s a whole life policy) and use that to pay down your mortgage balance so you can refi.

One other piece of advice: Smaller banks and credit unions tend to have much cheaper rates on mortgages and refis than big banks. You can also try mortgage brokers. Just get back in the ring and get your refi or mortgage at today’s historically low rates. your wallet will smile on you for it!

Tapping your 401(k) to pay down your mortgage and refi?! on …