Rethinking How to Refinance Home Loan

There will also be closing costs that include appraisal, credit reports, title fees, flood certification and lender underwriting fees. Usually those fees average about $2,000, but in some states they may be much higher.

Yes, there are commercials for "no fee" refinancing -- though at a slightly higher rate. You may not mind paying that higher rate (and paying the broker slightly more commission) if you're only staying in the home for a few years, and if the refinancing saves you money every month. The mortgage broker uses the extra commission to pay for your closing costs.

Says Hochberg, "It's not about the rate; it's about the monthly payment." He specializes in refinancing to eliminate other personal debt. Within months, eliminating other debt improves the homeowners' credit score. Then homeowners can refinance again at a lower rate accorded to those with better credit. But that process requires discipline to pay down debt, and time to heal the wounds. In the meantime, rates could rise.

With so much refinancing going on, it's tempting to think you can beat the mortgage market. But don't get caught in a vulnerable position just because you're searching for a low monthly payment. With rising rates, today's low payment on an adjustable-rate or interest-only loan could easily soar into unaffordable territory. And that's the Savage Truth.