Actually, no. Not necessarily. Maybe. Maybe not.

Pay very close to any refinance proposals you receive, ESPECIALLY from your current loan servicer!

As we enter a falling-rate cycle, the initial trend for lenders will be to advertise what seem like amazingly low rates. But beware: Those low rates will come at a high price (points).

Is a lower rate available? Possibly. Does it make sense to refinance? Not always.

Any mortgage will have standard closing costs. But you should be wary of paying points – that’s the additional cost you pay in exchange for a lower rate.

How do I know if it makes sense to refinance?

The analysis is simple enough – We take the overall cost of the refinance and divide it by the monthly savings.

What’s my recapture period?

Your recapture period is the length of time it will take you to recoup the costs of your refinance by way of lower monthly payments. Your true savings start after the recapture period.

An example:

Let’s say a refinance will result in monthly savings of $127. For the purposes of this example, let’s say closing costs for that refinance are $3,000. $3,000 ÷ $127 = 23.6. Your recapture period would be 24 months — After 24 months of the new loan, you will have recouped your cost for the refinance and will start realizing true monthly savings.

What should I consider before refinancing?

How long do you plan to live in the home? Do you anticipate any major life events on the horizon? When you do move, do you plan to sell your home or convert it to a rental? When could another refinance opportunity come along? What are my financial goals?

If your rate is currently above 6.00%, it would be a good idea to have a conversation with your trusted lender about refinancing. While it may not make sense to refinance just yet, it’s a good idea to look forward and begin strategizing about how and when to take advantage of lower rates.

Remember: Fortune favors the prepared!