Yes interest rates are great, even fantastic!  But, before you commit those finances... Be sure you want to stay in the home long enough to break even on the loan costs.

Yes there are costs involved!  And yes I know the lender told you it wouldn't cost you anything.  Everything costs and you and I both know it right?

When you refinance, you are actually closing your current loan and getting a NEW loan.  And the same closing costs that you or the seller paid for you when you bought the house will be back in play when you refinance. For example: appraisal  $500     survey  $500   lender charges $500  etc.  just to pick a couple.

Now what the lender probably said was "we can refinance your loan and it won't cost your anything out of your pocket" now that's more accurate.  What they will do is roll the costs of refinancing into the price of your NEW LOAN, so if your loan amount is $200,000 you may have anywhere from $3000-$6000 in closing costs that will be added to your new loan, so now you owe the lender $203,000.  While you will actually owe more, the benefit is that your monthly payment will be lower still because of todays lower interest rate as opposed to what your had before.

You need to be sure that refinancing your home loan is a smart move. First, calculate the total cost of the loan, including any financing or closing costs, appraisal, etc. Next, determine exactly how much you will save every month with your new loan payment.

Then, divide the total cost of your loan by the monthly savings, so you’ll know exactly how long you will need to pay on the property in order to break even.

Example: If you pay $2,000 in total loan costs, and you’re saving somewhere around $50 per month with your new loan payment, then it will take you about 40 months (8 years) to break even. If you don’t plan to stay in the home that much longer, then you should rethink your refinance.  Because if you are only planning to be there another 2 years, you may find yourself owing more than your house is worth.

So again, talk to your lender or Realtor and let them know of your plans before you jump into a refinance.