How do I know when to refinance my house at a lower interest rate?

[moonie1]

We financed a home in December 1999 for $87,900 at 8% for 30 years. The interest rates have dropped to 6.8%, would it be wise to refinance the 30 year mortgage now? And what kind of closing costs and fees would we be responsible for? We are located in Twin Cities Minnesota.

 

[HomeGuru]

The general rule of thumb is if the interest rate drops at least 2 points from your current rate, then it is time to take a serious look at refinancing. Consult with a mortgage broker.

 

[David J. Miller]

Homeguru is correct but it depends on how long you intend to live in the home. In your case, particularly since you live in Minnesota as do I, which means I know what your closing costs will be, you'd need the rate to drop a little more to make it worth your while. The closing costs represent a larger percentage of your loan, the smaller it is because many of the costs are fixed. This means you need a greater margin between your current rate & the new rate for it to make sense.

Ultimatley though, one mans pocket change is another mans fortune. In other words, contact a broker to do the math for you and decide from there.

I'd give you my number but quite frankly I am swamped as it is.