Jim, I recommend considering how long you plan on retaining your current home. If you're not going to break even on closing costs in a timely manner, refinancing may not make sense. At 5.75%, it may be worth your while to check it out.

Check and see (upfront) what your lender will allow should you lock in a rate and then rates improve (do they have a float down policy, can you get the better rate after locking, etc).

While there was some good answers below, I think it's important to encompass them all into one post.
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Despite just closing, it may make sense for you to refinance. Ultimately it will depend on how long you're planning to stay in the home (assuming you live there) and if you have an itchy trigger finger to refinance everytime rates drop 0.25%. To determine that, lets look at a couple scenarios that you could put your situation into.

I'll put mortgage amounts here with your current payment (assuming no PMI) and what it would be next to it (since I don't know your credit, I'm going to be somewhat conservative here and say 5.25%). I'll estimate closing costs to be $2000 (with no points to buy it down for this example, break-even may vary depending on loan size and typical costs for an area)

$125,000 mortgage - $729/mo --- $690/mo -- 55.5 months break-even
$200,000 mortgage - $1167/mo -- $1104/mo -- 31.7 months break-even
$300,000 mortgage - $1750/mo -- $1656/mo -- 19.2 months break-even
$400,000 mortgage - $2334/mo -- $2208/mo -- 15.8 months break-even

If you're looking to sell or flip this home in less than the period corresponding with your loan amount, it's probably best not to do anything. If you're planning on staying there longer than the break-even, it probably makes sense to do something.

If you're the type of person who will want to refinance everytime rates drop 0.25%, it may be better to to take a slightly higher rate in exchange for a portion of your costs to be covered by the lender (to decrease your break-even period). This scenario works best with larger loan amounts.

Lastly, you'll need to think about where the money will come to close your new loan. Even though you just bought a home, you will probably have a month of trailing interest (that month you skipped) and your escrow account will now probably need to be "re-funded". The cost between closing and your pre-paids could prevent you from refinancing if you don't have funds of your own to bring to closing. Some lenders will "net-fund' your escrow account in your loan payoff (your payoff will decrease by the amount of your escrow balance) while others will create a new escrow account which could be quite a lot of money if you're nearing tax time. Ask these important questions. If the person you're working with can't answer them, look for someone else; There's nothing worse than the blind leading the blind.

Disclaimer: This scenario doesn't apply to everyone, please be mindful of where you are in your amortization schedule. For you, this may make sense but others it may or may not be depending on what your long term goals are. Individuals much further into their repayment will want to review their payment schedule and decide if they want to restart their mortgage again or if they'd like to structure the loan to pay it off in the same amount of time paying less interest or to simply lower their monthly obligation without regard to long-term interest accrual. This piece is too difficult to cover here with just one post, contact me directly for a personalized analysis if interested.

Rob Weber
Wells Fargo
847.404.7006
rob.weber@wellsfargo.com

A general rule-of-thumb is if it's at least 1 point (1%) & you plan to stay there for a while, then go ahead and re-finance. There are closing costs (some lenders finance it rather than have you pay cash up front, which means more debt) & based on the amount of time you plan to stay in your condo, it should be long enough to recoup those closing costs for it to make sense.

I tell people to get a Good Faith Estimate from: 1) where they bank at 2) Credit Union (BECU has been the most competitive & my last 2 buyers left Seattle Metropolitan CU & went there because they had better rates & fees) 3) Banker/Broker. Not just a mortgage broker, but one that has their own portfolio funding (their own money) & can broker the loan out. I've used Kevin Lim, (principal) Seattle Pacific Mortgage, 206-818-3365 klim@seattlepacificmtg.com

Jim,
The most important element of any financial endeavor is establishing your goals. Make sure you're clear on your objectives.
Before you refinance, be sure your current loan(s) do not have a pre-payment penalty.
Respectfully,
- Kevin Smith

Jim
I would contact Kevin.Smith@wellsfargo.com. 206-389-1100. He can answer all your questions and if it is to your benefit to refinance he will do an excellent job for you. I am been working with Kevin for 15 years and am constantly amazed that his superior service continues to get better. Hard to improve when he is already great.
Mary

Ditto for James and Julie. I might add that you have a great rate as it is, and re-fi rates are generally higher. Then there is the closing costs and origination fee. If you needed to sell anytime soon you, heaven forbid, you would be trying to recoup more money on the sale pric which is highly improbable in this market.

In sum, you think youshould be absolutely sure that you are going to keep the condo for at least 2 -3 more years before you think about a re-fi now.

Keep in mind.. rates change daily...and sometimes even during the day. The 4.875% was valid for a few hours earlier in the day ... it has adjusted and the few places I've talked to this afternoon, ..don't have them anymore.

Julie's point #2 below is key. The new interest rate has to be lower enough to make paying a new chunk of closing costs worthwhile. A client of mine just refinanced this morning and it will only take him 7 months to break even (the monthly savings to match the closing costs he paid). That...is almost a no-brainer. If it's going to take you a few years...it's something you'll have to really think about.

Congrats on buying a condo! I am assuming that your interest rate is 5.75%. RIGHT now a 30-year fixed rate on a purchase is 4.875% at par; this is phenomenal. A refinance will be a little higher.

There are a few things that come to mind:
1. Make sure that you're in a conventional, solid loan program. A fixed mortgage for 30 years is the most traditional. Some of the ARM's or dare I say "sub prime" products are riskier for the borrower.

2. When you refinance you need to take into account a few things: You will have closing costs. When you get your Good Faith Estimate compare your total closing costs to the new estimated payment. Let's say you save $300 on your monthly payment and it costs you $7,000 in closing costs; this will take about 23 months to break-even...my point: make sure that you're going to live in the place longer than 23 months so that you recoup that investment

3. Usually it's a good time to refinance when you save 1 point or more. So, 5.75% is a phenomenal rate and you might want to ask your bank what their PAR rate is on a refinance to compare.

4. You will need an appraisal. Right now, I think that the loan to value ratio can't be over 95%. This will determine if you can roll the closing costs into your loan or if you will need to pay them up front. Having owned your town home for 6 months might be a problem when it comes to appraising at a higher value.

5. Have your Realtor review your Good Faith Estimate -- there should be NO junk fees. the Origination Fee should be no more than 1% and if you are not paying to discount your rate there should not be a discount fee applied. Also, make sure that the Yield Spread Premium is close to your interest rate so that the lender is not making a ton of money on the back-end of the loan.

6. I personally bank through Windermere Mortgage Services (I work for Windermere) and they use HomeStreet Bank. This is a very solid, safe lender. You're welcome to work with who'm ever you choose, but I'd definately compare what they can do for you. Call Tami Bill at 206-442-5301 and tell her that Julie Hall sent you. She is a great lender.

I would look into it and I wish you luck. Let me know if you have any other questions or need clarification. Good luck!! It's definately a buyers market!

You can refinance anytime - here is the catches
1. During the 1st year they will use the purchase price as value- even if the appraisal says it is worth more
2. Depending on what you put down and what you quailfy for in todays market you may have to pay the closing costs out of pocket- can't add to loan amount

for more info feel free to call us-