As I was getting ready for work Tuesday morning, The Today Show on NBC had a segment with Barbara Corcoran, a “real estate expert”, about refinancing. Being a loan officer, I watched intently, hoping Ms. Corcoran would dispense good advice about the multitude of opportunities available for refinancing. While some of her advice was accurate, she made a number of points in the allotted three-and-a-half minute segment that were so erroneous and misleading, I had to respond.

The video can be found on the TODAY Show website. I recommend watching it first.

I suppose pointing out that getting any financial advice in a three-and-a-half minute segment is not a good idea. Moreover, Ms. Corcoran sold her real estate business in 2001 for seventy million dollars. While I respect her success, she is no longer involved in an industry that is vastly different now and her experience was that of an real estate agent/saleswoman, not a mortgage professional. Hopefully, the segment prompts viewers to contact a mortgage professional for more in-depth personalized advice. I know she meant well, but I have a real problem with the following tips from Ms. Corcoran:

80% LTV can “typically get refinancing”
While the statement is true, she seemed to imply that if your mortgage is more than 80% of the home’s value (commonly referred to as LTV or Loan-to-Value), you cannot refinance. Nothing could be further from the truth. In fact, there are government sponsored/supported programs that allow homeowners to refinance up to 125% of their homes value. Being over 80% does not automatically preclude anyone from refinancing.

720 FICO for best rates
Again, the statement is mostly true, except that the best rates are for those who have a 760+ credit score. In fact, rates may differ at 760, 740, 720, 700, 680… You get the idea. However, mortgage interest rates are determined by a number of factors including LTV, credit score, your state of residence, overall debt profile, and others.

Ask for a term equal to that remaining on your current mortgage or “you’ll get ripped off on that interest rate.”
You will not get “ripped off” if you get a new 30 year mortgage. In fact, a new 30 year mortgage is likely the best way to secure the lowest monthly payment. Getting a new mortgage equal to that of your remaining term is appropriate in some cases. Ask your loan officer to show you the payment differences of various terms and programs.

Pre-payment penalties…. don’t get one and don’t refinance if you have one.
This one is really egregious, primarily because it can cost you a lot of savings. If you currently have a pre-payment penalty, refinancing now at a low rate may offer savings benefits that offset the penalty. If you wait for the pre-payment penalty to expire, interest rates will likely be higher. Ms. Corcoran made a good point about peak-even analysis, and a pre-payment penalty should be part of that. If anyone offers you a new loan with a pre-payment penalty, RUN!!! Pre-payment penalties are virtually extinct, as they were part of the sub-prime mortgage world that is no longer in existence. This piece of advice would have been helpful in 2005 but is misguided and irrelevant in 2010.

No closing costs, no points. Lenders will bury the costs in the instrument.
The intimation is that a no closing cost/no points loan is a bad thing. Not true. A customer choosing a no closing cost/no points loan will trade those costs for a higher interest rate. It’s that simple. Once again, have a mortgage professional show you the difference in a traditional mortgage and a no closing cost/no points mortgage loan.

It take 90 days to refinance.
Bogus. Typically, refinances are taking 45 days. I have heard horror stories from clients when they use a traditional pick-and-mortar bank where loans have taken six months. Perhaps it’s different in Manhattan but for the rest of us, there is no excuse for more than 60 days in a worst case scenario.

PMI 1.75% going up in April.
This is misleading and incomplete. PMI is Private Mortgage Insurance. The 1.75% Ms. Corcoran refers to is the FHA Mortgage Insurance Premium, or MIP. HUD has proposed raising the MIP to 2.25% this year. MIP is typically financed into the loan. FHA insured mortgages do require Monthly Insurance (MI) of either.50% or.55% but it is usually much less than PMI. PMI is required if you have less than 20% equity and a conventional mortgage. PMI rates vary depending on several factors and is typically paid each month as part of your monthly payment. Again, ask your loan officer to show you the payment differences.What is comes down to is that a mortgage professional can help you determine if refinancing is is your best interest. Sometimes, refinancing is not the best option for you right now. Don’t make the decision based on sound bites from a TV show. Ask a mortgage professional to sit down with you and examine your current financial situation. It won’t cost a penny and may save you thousands of dollars.