Over the last few weeks, we have seen the lowest 30 year fixed mortgage rates in history – 4.5% or lower, with 15 year fixed at 3.9%. Before you jump at the temptation to refinance, take a step back and look at all the facts.

The lowest of the low rates are reserved for premium borrowers – those with strong credit and a low debt-to-income ratio. You may not qualify for the lowest available rate – be sure to discuss that with your lender before starting the refinance process.

Refinancing incurs significant costs, including application fees, appraisals, credit reports, inspections, insurance, title insurance, surveys, points and other fees specific to the lender. There may also be hidden costs, like prepayment penalties, that can wipe out the monthly savings gained.

Do you intend to stay in this home long enough to reap the rewards of the savings?  For example, if you are only saving $100 a month and you intend to sell your current home in 18 months, you probably won’t realize the actual savings after costs.

What about points? Lower points produce a higher interest rate. Again, it probably depends on how low you plan to stay in your current home. Balancing points vs. rates should be considered with how long you are giving yourself to recoup costs.

 The best plan of action is to shop around for current refinance packages from your lender and other lenders. Many may choose to offer special deals or no-cost packages, especially if you have not refinanced previously. Your put a lot of time and effort into purchasing your home – take the same care with your mortgage plan.