When and How Should I Refinance?

Your first mortgage almost certainly won't be your last. The typical homeowner keeps a mortgage for less than seven years before moving or refinancing. That holding period can be considerably shorter when rates are dropping and homeowners rush to exchange their loans for something cheaper.

Knowing when you should refinance is getting tougher. The old rule of thumb was that interest rates had to drop a full 2 percentage points for a refinance to make sense for most people. But that was back when everybody had 30-year fixed mortgages and refinancing costs were high.

Today there are so many different kinds of mortgages and so much competition driving down costs that rules of thumb don't really work anymore. You really need to take a good look at your individual situation and what lenders are currently offering.