I my opinion no one here has enough information about your situation to give you advice, but if you have to start paying PMI, (either up front or with payments) my gut says it might not be a good idea. A financial planer that you trust or accountant is probably the best person to help you answer this question.
There is more to this question than just the rate drop. How long do you think you will stay in the property? How many years do you have left on the loan? How much interest will you pay from this date forward with your current loan v/s how much will you pay on the new loan?
When you refi, you reset the amortization and start paying almost nothing but interest again. That will reduce your tax burden, but probably increase the total amount you will pay in interest over the life of the loan.
How much will your payment drop if you refi? Don't for get to include the PMI. How badly do you need your payment to drop? Could you keep your loan maybe make one additional payment per year and therefore significantly cut your number of future payments and effectively cut your current rate?
I refinanced this year. I had 25 years left on my loan when I refinanced. My rate went from 5.87% to 4.125%, I cashed out some equity and my new loan is a 20 year loan. My payments went up very slightly, but I knocked 5 years off my loan and payed off another debt.
I refinanced with Met Life. Colleen McQuillen is the leder I used there. email@example.com
You don't have to pay PMI if you have less than 20% equity, the better option is lender paid mortgage insurance. This is where the lender pays a 1-time premium to cover your mortgage insurance at settlement. This can be built into your rate. With 5.75% you can save significant money going to near-current rates and even look at a no-cost refinance where all of your 1-time closing costs are covered.
Rates are at the lowest point for 2011, the importance of making a move this weekend is that the US debt downgrade announced last night will very likely make mortgage rates go higher Monday morning.
I am working all weekend and would be happy to go over numbers with you. Feel free to contact me 301-585-7283.