Greg posted this question on Trulia Voice this morning and my response follows:

My wife and I bought a 2 unit duplex about a year ago. We went FHA and got locked in at a rate of 6.25. We both have 710 credit scores. We do not have much equity in the house yet. But with rates now around 5 % is it worth us to try and refinance and if so who would you recommend?


I would first talk to the loan officer that you originally secured your current mortgage through and see what they may be able to do for you. The difference between the two rates per $10,000 is about $8.00 or $80.00 per month. Before you refinance, find out what, if any, costs you are going to incur for the refi. Then take into consideration how many years you are planning to remain in your home and see how long before you begin realizing the savings. In many cases, it can be four, five or six years, again depending on what your costs can be (ie origination fees, new title insurance, etc.). Using my above example of $80 per month on a $100,000 mortgage and say your refinacing costs are going to be $4000, you would need to be in your home for at least 50 months before you started realizing a savings from the refinance. And I know it is difficult to anticipate how long you are going to be in a home, but sometimes it is better to pay the higher rate than refinance, especially if you have to include some of the closing costs into the refi. There isn't a pat answer, but look at the costs versus what you will be saving and as additional piece of information, there is a proposal from The National Association of Realtors® to have a program where mortgage interest rates would be pegged at 4.5% for a certain period. And this proposal has gained some traction in Washington so maybe watch what comes out of D.C. before you make a decision. I hope this helps you in your decision.

Don Roth