When to Refinance?

As interest rates start to creep up, the window for homeowners to save money gets smaller and smaller. The lower mortgage interest rate can save homeowners cash every month.

The question is whether or not you should refinance. The simple answer to this is to determine if the amount of money you will be saving every month will total more than the mortgage refinancing costs. For example, if the refinance costs $3,000, and you end up saving $75 a month, you know the break even point will determined by $3,000/$75. This comes out to 40 months. It will take you 40 months until you break even and after that, it will be true savings in your pocket.

I suggest you using Fool.com's calculator located on http://partners.financenter.com/motleyfool/calculate/us-eng/home12.fcs. The calculator will help you determine how much the total refinancing cost will be.

Take the total refinancing cost and how much the new mortgage will cost you every month and determine whether or not it will be worth refinancing. Generally experts say don't bother refinancing unless your rate is 2% higher and you plan to live in the same place for at least another 3-5 years.

Other Reasons to Refi
Some of the other more common reasons to refinance is if you currently have an adjustment rate mortgage and feel like the rates could head higher in the near future. By refinancing and going with a more predictable mortgage payment such as a 15 or 30 year fixed, it could not only save you money in the long run but provide you a sense of comfort.

Be sure you ask your mortgage company if your mortgage has any sort of pre-payment penalty because it could potentially offset any savings you may receive through the refinance.