With mortgage rates at unprecedented lows, is now the time for you to refinance? The average 30-year loan stands at 3.4 percent and the average 15-year rate is 2.69 percent, both rates 2 points lower than they were just three years ago.

With mortgage rates at unprecedented lows, is now the time for you to refinance?

The average 30-year loan stands at 3.4 percent and the average 15-year rate is 2.69 percent, both rates 2 points lower than they were just three years ago.

Whether refinancing is worthwhile depends on a calculation involving four main numbers: the amount the homeowner would save monthly; the savings over the life of the loan; how long the homeowner expects to remain in the home; and the cost of refinancing.

For most people who expect to remain in their house more than a few years, who have more than a decade to go on their loan and whose interest rate is north of 4.5 percent, refinancing is worth a look.

"I think everybody should be doing this," said Paul Dolce, who runs the financial planning company Financial Solutions in Dublin. "Don't worry about waiting another two months to get another 16th of a point. It won't make much difference over the life of the loan."

But homeowners should consider several things before diving in.

To get tips for homeowners, we spoke with Dolce; Marianne Collins, executive director of the Ohio Mortgage Bankers Association; Janet Harrison, a certified financial counselor with the credit counseling service Apprisen; John Mavrouleas, the mortgage lending manager with Kemba Financial Credit Union; and Tom Pausche, chief operating officer of Strategic Mortgage Co. and this year's president of the Ohio Mortgage Bankers Association.

10 issues to consider

1. Your home might not be worth what you think it is. If your home is worth less than the balance of your loan, you might have trouble refinancing. If you can afford it, agree to cover the shortfall, which should allow you to qualify. Or, if your loan is held by Fannie Mae or Freddie Mac and you are current on the loan, you might qualify for the Home Affordable Refinance Program, which allows homeowners to borrow up to 125 percent of a home's value in a refinancing. 

2. Your current lender might offer a deal to keep you. Get more than one refinancing estimate, but be sure to include your current lender. Lenders might be able to trim closing costs for existing customers because they already hold the loan.  

3. Don't assume that you won't qualify to refinance.

Even if your credit score is low or you lack a long track record with your current employer or lack equity in your home, you might qualify for special loan programs or a lender's "portfolio loans," which are loans lenders don't sell. It doesn't hurt to ask. 

4. Closing costs can vary widely. Refinancing costs typically include an application fee, title insurance, transfer fees and appraisal costs. These costs can range from a few hundred dollars to several thousand dollars, depending on the lender. Be sure to compare.  

5. Look beyond teaser rates and "no-cost" refinancing pitches. Typically, the lower your interest rate, the more you'll pay in closing costs, so when comparing loans, be sure to compare both closing costs and rate. One easy way to compare is with the loan's annual percentage rate, which is designed to include the true cost of the loan by factoring in points and closing costs. 

6. Think twice before starting over. Mortgage interest is front-loaded, so the bulk of the interest on a 30-year loan is paid during the first 10 years. This means that if you start over with a 30-year loan, you'll pay mostly interest for the first several years. Repeatedly starting over will bring you little closer to paying off your home.  

7. Refinancing might reveal a hidden savings. If you have built up at least 20 percent equity in your home, you should be able to drop private mortgage insurance from your payment. If you're close to 20 percent and can afford it, consider putting some cash into the home to eliminate the mortgage insurance payment.  

8. Hidden savings, Part 2.

Another way of saving money is to roll a home equity loan or a second mortgage into the new mortgage. This can be useful if your home equity rate is higher than the mortgage rate and if you have enough equity in the home to support the larger loan. This has the added advantage of eliminating the uncertainty of a floating home equity rate. 

9. Familiarize yourself with the variety of loans.

Although 15- and 30-year loans get all the attention, many banks will set a loan term in any five-year increment (up to 30 years). Some will even agree to other increments. This can be useful if you don't want to keep starting over in a 30-year loan but can't afford to go to a 15-year term. 

10. Your home shouldn't be a piggy bank. Sometimes it's necessary to take equity out of the home when refinancing, but do it only for emergencies unless you want to be paying on the balance for the rest of your life. jweiker@dispatch.com