By Jim Donovan

PHILADELPHIA (CBS) — To refinance or not to refinance, for many homeowners these days, that’s the question. The interest on a 30-year fixed rate mortgage is now averaging 3.87 percent. So does it make sense to refinance? Or if you already have refinanced does it make sense to do it again? 3 On Your Side Consumer Reporter Jim Donovan is here to tell us what you need to consider.

When Whit and Beth Clay bought their home in New Jersey last May they locked in a 30-year fixed rate mortgage at 5 percent. Whit says, “I couldn’t believe that interest rates would go any lower than they were, I mean 5 percent is pretty low.” But rates did go lower. A few months later, the couple refinanced at 4.25 percent, saving $300 a month. According to Whit, “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.”

Melissa Cohn, President of The Manhattan Mortgage Company says, “If the rate is at least 3/4 of a percent lower and they expect to be in their property for the long haul then it’s definitely a good idea.” But before you refinance it’s important first to do the math. Figure out how much you’ll save in lower payments versus what you’ll pay in closing costs and fees.

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 get passed along to homebuyers in the form of higher rates, at least a tenth of a percent. On a $200,000 mortgage , that’s an extra $5,400 over the life of a 30-year loan.

With the latest dip in interest rates, more homeowners are rushing to take advantage. According to The Mortgage Bankers Association, refinance activity climbed nearly 9.5 percent last week alone.

Top Content On CBSPhilly

Watch & Listen LIVE