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We’ll be closing our refinance soon and I’m looking forward to getting that done. Our interest rate will be reduced by 1%, and our loan term will be reduced to 15 years from 20. (Although we still intend to have the mortgage paid off much, much sooner than that.) This will help us in that goal, since we’ll be paying about $60 less in interest each month.

If you’ve never done a refinance, the process is pretty similar (and sometimes identical) to getting a mortgage in the first place. In our case, they were able to waive the appraisal, so that made things easier. The other requirements were: a credit check, proof of income (copies of recent pay stubs), copies of bank statements, copies of our 2007 W-2s, proof that we had enough money to cover the closing costs (which are anticipated to be very low), and an updated homeowner’s insurance listing them as the mortgage holder. It seems like the biggest difference between a refinance and a new mortgage is that you don’t need a down payment, since obviously you already own the house.

Closing costs are something to watch out for, as is making sure that everything in the mortgage paperwork is correct when you sign it. (Because sad to say, based on past experience there are usually at least a couple of typos in them.) My own personal guideline as to when it pays to refinance is when the new interest rate is at least 1% lower than the existing rate, and when I’m planning on staying in the house longer than it will take to recoup the associated costs.