Is a mortgage refinance right for you?

As of Nov. 23, 2011, the average 30-year mortgage rates were 3.98 percent. The average 15-year mortgage rates were at 3.30 percent. If that’s not enough to make you consider refinancing, I don’t know what would be. Rates are at record lows, but is refinancing right for you?

Calculate the costs

Even though you’re refinancing at a lower rate, you don’t always save as much as you’d like. In fact, sometimes you can lose money. Shoot for an interest rate that’s an entire point below your current rate, especially if you aren’t going to stay in your home long-term – closing costs and taxes might eat up any long-term savings. Keep in mind that you aren’t getting rid of debt by refinancing, you’re simply reorganizing it. Expect to spend at least 3 to 6 percent of your (outstanding) principal on refinance costs. To estimate those costs, try using a mortgage calculator.

Have a little patience

Mortgage refinance can really be beneficial if you plan on staying in your home for an extended period of time. But since the mortgage bust, lenders have tightened up their restrictions to prevent faulty refinance – which means a lot more work on your part. And to get the best mortgage rates, you’ll need to have impeccable credit and a good amount of equity in your home.

Call your lender

See what your current lender can do for you. If you’re a good customer – pay your mortgage on time and have good credit – they’ll want to keep you. Lenders know they need to compete in a low-rate environment, so they might be willing to work with you on lowering your rate.

If you can’t get much out of your current lender, shop around. It doesn’t hurt to call and see what you can get. Upfront mortgage lenders or mortgage brokers might be worth looking into as well for lower mortgage rates.