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Is refinancing right for you?
Is refinancing right for you? / Derek E. Rothchild/Getty Images

Interest rates in the vicinity of 4% have countless homeowners champing at the bit to refinance their mortgages.

But, skinny interest rates aside, it’s still essential to consider:

How much will you really save?

Interest rates have been low for a while, so refinancing may not save as much as you think. For instance, refinancing a 4.75% loan to 4.42% (the average rate at the end of October) trims only $40 off of your monthly payment.

How long will you remain in the house?

Joe Gross, host of the mortgage radio show Your Home, Your Future, suggests using a five-year benchmark. If you move before that, you may not recoup any of the refinancing charges.

Do you qualify?

Low interest rates or not, lenders will still want to see evidence of your ability to meet your obligation. “What’s your income? The value of the home? Your credit score?” says Gross.

What if you're close to owning the house free and clear?

If you’ve had a 30-year loan for a number of years, refinancing puts you back to the full 30-year term. “Four percent is a low interest rate, but you really have to look at the cost and savings and make the decision based on that,” says Gross.

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