Is now the time to refinance? Here's how to decide

By Leigh Kamping-Carder | January 20, 2015 - 12:59PM

You may have read that mortgage rates are falling—as of last week, the average rate for a 30-year fixed-rate loan was 3.8 percent, the lowest since May 2013, per the New York Times—raising the inevitable question of whether it’s the right moment for you to refinance.

Considering the costs associated with refinancing—several thousand dollars or more in appraisal and other fees—it’s not always the smart move. But the rule of thumb is that if the new rate is a percentage point lower than your current one and you plan to stay in your place for the foreseeable future, it’s worth it. If the difference in rates is more like half a point, it’s still a good idea to examine your options.

Of course, everyone’s circumstances are different. Zillow has a handy refi calculator, which not only shows how much you’d save each month but also the point at which you’d break even on the fees (useful if you’re mulling a move in the next few years).

Also, keep in mind that if you own a co-op, the board will have to sign off on your application. If you’re refinancing simply to take advantage of lower rates (and not borrowing more money than your initial loan or otherwise affecting the loan-to-value ratio), your board will likely approve the plan without a fuss.

Ask an Expert: How much cash can I take out when I refinance? Do I have to tell the co-op board why I need it?

Now could be the perfect time to refinance your mortgage

Cash poor but co-op rich? Consider a home equity line of credit (sponsored)

Brick Underground articles occasionally include the expertise of, or information about, advertising partners when relevant to the story. We will never promote an advertiser's product without making the relationship clear to our readers.