Whenever interest rates drop, as they sometimes do when Alan Greenspan gets a little out of hand, homeowners might have the opportunity to save money. Falling interest rates usually create an opportunity for homeowners to get a better mortgage refinance rate.
Deciding whether to refinance your home comes down to a basic calculation: Will your savings from reduced mortgage payments be greater than the up-front costs? Therein lie the guts of the refinancing decision.
When it comes to home mortgage refinancing, however, such rules of thumb can be misleading. The interest rate cut required to come out ahead will vary dramatically depending on how long you plan to hold the new mortgage, how many years you've already paid on the current mortgage, and the increasingly available opportunities for cutting closing costs.
For example, the Fool provides a simple "What will my refinancing costs be?" calculator that serves nicely as a checklist of common closing costs. Use it as a guide for surveying potential lenders. Once you get the data from lenders and plug it into the calculator, you will be given expected closing costs -- the size of the interest-savings hurdle you must jump to come out ahead.
Read the rest of the Fool Refinance Article.