When interest rates decline, you can save money on your home loan by refinancing with a new loan. However, refinancing costs money. Therefore, you must decide if the savings are enough to justify the costs of refinancing.

This problem is not difficult if you think of the refinancing as an investment. You are investing the costs of getting a new loan and receiving reduced monthly payments in return. The monthly savings continue until you retire the new loan. Therefore, you need to estimate how long you will have to keep the loan (and the home) to recover your investment. Beyond that time, the savings are a pure return on your investment. More->