Is it worth refinancing your mortgage? It certainly can be!

If you have a 30-year mortgage for $150,000, at 8.5%, your basic monthly payment is around $1,153. How would you like to lower that payment to about $909 a month? Refinance at 6.1% with a 30-year fixed mortgage, and you cut $2,928 off your mortgage payments every year.

Shop around, and you may be able to do it! The single most important factor in deciding whether to refinance is how long you plan to be in your home; not the interest rate you get. When you refinance, you lower your monthly payment (we hope!), but you have to pay closing costs, just like when you first took your loan. And closing costs will usually run you as much as 3%-5% of your mortgage amount (depending on where you live).

So, to find out how long it will take you to break even, divide your total closing costs by your savings.

Bottom line: If you could save $300 a month by refinancing today, would mean you'd have to stay put between 17 and 24 months to come out ahead. If you plan to live in your current home that long, great. If not, then refinancing isn't right for you.

Refinancing Smart

1. Look for a lender who will allow you to lock in your interest rate and points any time between application and loan approval.
2. Shop for lenders with low closing costs. You can expect to pay about 3%-5% of the total loan amount for refinancing, but you may be able to do better. We've even heard of lenders who charge no points, and still offer competitive interest rates! So don't be afraid to NEGOTIATE. Remind the lenders that there are plenty of THEM around.
3. Plan on checking interest rates and points with five or six different lenders, including banks, mortgage bankers and mortgage brokers. Start with your current mortgage holder. Right now, a good fixed rate is a little over 6% (national average), while a good five-year adjustable rate is a little less than 6%. Compare your own bank's rates with those of other local lenders. Ask for references from friends and colleagues - chances are some of them have refinanced.

Straight Talk Tip: If you refinance, pay special attention to the way you deduct any points on your taxes. Let's say you refinance and pay $3,000 in points. You deduct those points over the life of your loan, not up front like with a new mortgage. In this example, you would deduct $100 a year over the life of a 30-year loan. So after three years, you have deducted $300 with a $2,700 balance. If you refinance again, you can deduct the remaining $2,700 on this year's taxes. Then you start all over again with your new mortgage - deducting the new points over the life of the loan.

Page 1 2 Next »