the decision on whether or not to refinance has meant balancing
the savings of a lower monthly payment against the costs of refinancing.
But in recent years, companies have introduced "no cost" and low-cost
refinancing packages that minimize or completely eliminate the
out-of-pocket expenses of refinancing. (These refinancing packages
compensate with a higher interest rate, or by including some of
the costs in the amount that is financed.)
refinancing, the most often cited rule-of-thumb is that the interest
rate for your new mortgage must be about 2 percentage points below
the rate of your current mortgage for refinancing to make sense.
However, with the newer low- and no-cost refinancing programs,
it can be worth your while to refinance to obtain a smaller reduction
in interest rates.
How long you
expect to stay in your home is also a factor to consider. If you'll
be moving in a few years, the month-to-month savings may never
add up to the costs that are involved in a refinancing.