I’ve been meaning to refinance our home for a long time. However, we’ve held off because we weren’t sure where we’d end up, what with my husband finishing school. He’s teaching for two local universities right now, and there is a good chance that we will, in fact, be here for a while. Which means that I am very interested in refinancing our loan. Especially now that the national average for a 30-year mortgage has slipped below 4%.

Time to Refinance?

If you have a mortgage loan that is at least one percentage point higher than the rate you could get right now, it might be time to refinance. And with mortgage rates dropping ever lower, it appears that now might be just the time to pull the trigger. I know I’m about ready to. Even if I don’t get the best rate (and I should be able to), I would still likely save money in the long run.

As you consider whether or not to refinance, you need to look at the fees that you will likely incur by doing so, as well as consider how much longer you expect to be in your home. Sometimes, if you will be moving soon, it’s not worth it to refinance to a lower rate — unless it’s a much lower rate. We expect to be here for a while, so it might be a good time to just go for it. Plus, with the rates as low as they are, even if we do move in a year, we’ll still have come out ahead.

Refinance to a Lower Term?

Obviously, if we do refinance our home, we won’t lengthen the term. We have about 25 years left on our mortgage, so the longest term we would get is 25 years. And we would cash out any of the equity we presently have in the home. What we would do, however, is consider refinancing to a lower term. Right now, we can handle our payments. With rates as low as they are now, we could actually refinance to a 15 year mortgage, and only pay $100 more a month than we are paying right now — but save more than $85,000 in interest over the life of the loan.

Before you refinance to a lower term, it is important to make sure that you will be able to handle the higher payment. A lower term usually results in higher monthly payment, even though you save in interest over time. So, before you do it, make sure you have the cash flow to handle the increase.