When to Refinance?

As a basic rule of thumb, you should refinance (without getting cash out) if you can lower your interest rate by 1% and you are keeping the same term length (30, 20, or 15 year) and you will own the property for 3-5 more years. Another factor to consider is if you can lower you interest and reduce the term of your loan. By switching from a 30 year to a 15 year mortgage can save you tens to hundreds of thousands of dollars depending on your loan amount. You can avoid paying out cash and still get a low rate by adding the closing costs to your new mortgage. This minimizes your out of pocket expense. Does that mean shouldering a lot of extra debt? Not necessarily. If you've had your current mortgage for at least three years, you've probably reduced your balance by several thousand dollars and your home should have increased in value. So you may be able to add your closing costs onto your new loan and still end up with a mortgage that's smaller than your original one -- plus, of course, a lower rate and lower monthly payment.