I have always found refinancing way more painful than buying a home and getting a mortgage in the first place -- there are always supposed to not be fees, and then there are, and then the lender wraps them into the loan like they're doing you a favor -- arrgh!

I agree with Steve that the old 2% rule-of-thumb is out the window. My new rule-of-thumb would be if you can save 1% for three years, you're probably good.

But do check on the prepayment penalties, because you don't want to find out when you move that they're charging you thousands for the "privilege" of paying off your mortgage.

Hey Erin,
There are so many more questions that I would have to ask to answer your question accurately. The standard rule is 2% interest savings. I think that is absolute baloney! When it comes to interest savings/closing costs, there is no standard rule.

Each individual has different financial goals and circumstances and therefore must answer your question in their own personal context. Sometimes it can even make sense to refinance to the same interest rate. For example, If you have an Adjustable Rate Mortgage and can get a fixed rate for the same rate, it may make sense to refinance if you know that you will be in the home long after the ARM would have adjusted and you don't want to take the future interest rate market risk.

The 50,000 ft answer is simple: The longer you will stay in the home, the smaller the interest rate change needed to recoup your closing costs and give yourself a decent return on your investment.

A trusted loan professional will take the time to ask you questions about your circumstances. He/she will have tools to help you compare mulitple loan scenarios and time frames side by side with your current mortgage. This will give you accurate and actionable information to see if it is financially beneficial for you to refinance.