I’m in the same situation as you and am seriously contemplating a refi. My area was hard hit by the housing bubble and home prices have just returned to a reasonable level, so my house is at a fair price and money is cheap (if you can get it). I was told, however, that the rule of thumb is get a loan that’s 2 points lower than what you have now, which for you and I would be 3.75%.....?
Why not keep the loan you have pay 13 payments instead of 12 a year and be done with it in about 6 years?
I think that was when people were moving every 3-5 years. The 2-point drop would be what it would take to the reduce the payment enough to cover the costs of re-financing.
That 2 percent thingy applied when mortgages were 8 to 10 %. If you go from 5.75 to 3.75, that’s a 35% decrease in interest costs. That is the same percentage if your rate were to go from 10% to 6.75%. Who wouldn’t jump on that one?
If the payout (savings in interest costs) pays for the refi costs in 3 years or so, it is found money.
“I was told, however, that the rule of thumb is get a loan that’s 2 points lower than what you have now, which for you and I would be 3.75%.....?”
I have been told the same thing. But the numbers don’t lie. The only thing that would mess up my plan is if for some unforseen reason, I’d move. But if I stay, and pay it off, I’d save $8k.