Refi: Weighing fees and rates
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Should I pay no or low fees for a slightly higher rate, or splurge and get a lower rate?

Q: My current rate on my 30-year fixed-rate mortgage (maturity date is 2034) is 5.625 percent. Should I try for lower? Right now I am unemployed, so I assume this could cause a problem.
Q: I'm looking at closing costs of about $2,200 on a loan of $410,000. The rate change would be great, from 6.5 percent to 5.5 percent, but for an extra quarter point they'd eat those costs. That's about one-quarter of the savings for the life of the loan, but it would be nice to not spend the extra $2,200 right now. Should I suck it up?

Holden Lewis: On the last part of the first question: You'll have to guess about the direction of mortgage rates to decide whether to wait to see if rates drop. Keep in mind that if you refinance now, you can always refinance later. In the meantime, you're saving money every month because you refinanced now instead of waiting.

With a mortgage calculator, it's easy enough to figure out what your break-even point is for different scenarios. Once you know the break-even points and can compare them, it comes down to a judgment call. The first questioner can get a lower rate by spending $1,600 more; the second questioner can get a lower rate by spending $2,200 more. Maybe they really need the money now. A personal-finance textbook might yield a "correct" answer, but people's wants and needs aren't always summed up that clearly.

Will you save by refinancing? Current monthly payment: Current interest rate: Balance left on mortgage:

A related question: When should I pay discount points?
Q: How can you tell if paying a point or two at a lower interest rate would be better than paying a higher rate with zero points?

Holden Lewis: It all comes down to calculating the break-even point on a loan, with discount points compared to a loan without discount points. Do you expect to own the house longer than the break-even point? If you pay the discount points, and then a week later the furnace dies, will you be too broke to replace it? It's a judgment call.