You should consider refinancing if the new rate you can get is a percentage point or more below the rate you currently pay.
If you don’t have a refinancing source that you trust it’s always a good idea to shop around. Ask at least 3 brokers or bankers to give you a good-faith estimate. There’s no cost for this service and it will give you an idea of the fees you’ll pay to refinance. Don’t forget to talk to your original lender or current loan servicer. They may offer additional incentives to keep you as a customer.
Finally, before making a final decision, do the math. Calculate your monthly savings over the length of time you anticipate staying in your house. Check your existing loan docs to make sure you don’t have any prepayment penalties or other costs associated with paying off your current note early. Subtract this number plus your closing costs from your anticipated savings. If the number is enough of a positive then go for it!
Upside Down on Equity?
With the crash in real estate you could very well be upside down on your home equity. If this is your situation you may still be able to find relief through the FHA’s Streamline Program.