What to know about home refinancing

East Providence, RI - Millions of homeowners are considering refinancing to take advantage of low rates, but the question is, should you?

The average rate on a 30 year fixed loan is now 3.87 percent.   That's enough to make someone refinance, or perhaps refinance again.

Whit and Beth Clay bought their home in New Jersey last May.

The couple locked in their 30 year fixed rate mortgage at 5 percent.

"I couldn't believe that interest rates would go any lower than they were.  I mean 5 percent is pretty low," said Whit Clay.

But they did go lower.  And just after a few months in, the Clays refinanced to 4.25 percent.

"The closing costs were wrapped into the mortgage so we had no closing costs and ultimately what we ended up having was simply an appraisal fee and the cost of applying for a mortgage," said Whit Clay.

With the latest dip in interest rates more homeowners are taking advantage.

Refinance activity has climbed nearly nine and a half percent in the last week.

Melissa Cohn, president of the Manhattan Mortgage Co. tells clients,  "If the rate is at least three quarter of a percent lower and they expect to be in their property for the long haul then it's definitely a good idea."

But the near record low mortgage rates are expected to inch up this spring.

To pay for the payroll tax cut, Congress has ordered mortgage giants Fannie Mae and Freddie Mac to increase their fees and turn them over to the U.S. Treasury.

Those fees will likely get passed along to homebuyers in the form of higher rates, at least one tenth of a percent.

On a 200-thousand dollar mortgage, that's an extra 54-hundred dollars over the life of a 30 year loan.