Last month we debuted a new column on Richmond.com: Ask the Agent. Like the name says, it's your chance to ask a local real estate agent any question you'd like. This month the subject is refinancing. Ask the Agent appears the first Thursday of every month.  

The interest rates have certainly come down. In fact, today's rates rival those of 2004, with the 30-year fixed at 6.0 percent, and ARMs (adjustable rate mortgages) in the low- to mid-5 percent range.

The basic question you and your banker need to address now is this: Will refinancing today will save you enough money on a monthly basis to offset any closing costs in a short enough period of time? If yes, now could be the time.  Put into simple terms, if it will cost you $1,500 to refinance, but you will save $150 a month, you will break even from the refinance fees 10 months. In the months that follow those first 10 months, the money saved will just be money in your pocket.

I see this as a great opportunity to improve your overall financial health.  Since you've been used to paying a higher mortgage payment, why not spend that extra $150 a month to pay down the principle of your loan? When it's time to sell, you'll be impressed with how much equity that small amount per month has earned you.

Of course, if you have consumer debt (credit cards, auto loans, etc.) with higher interest rates than your mortgage rate, it's probably a better idea to put the $150 a month toward paying down that debt.

Many buyers who financed a home purchase with an ARM in the early 2000s are now faced with the ability to refinance that loan into a more conservative product and still experience very affordable monthly payment. If your current loan will adjust or balloon – meaning come due – in the next couple of years and you are not planning to move, now is definitely the time to consider a refinance. Although your monthly payment may be higher, the end result will likely outweigh the upfront change in your current payment and household budget.

So let's look at some hard numbers so this is very clear. For this, I rely on the expertise of mortgage lender Chris Lester with First Horizon Home Loans.

In a situation where you originally borrowed $320,000 with a fixed rate of 6.9 percent for 30 years, you could refinance with your original lender with as little as a 1/2 of a point rate decrease and save more than $100 a month. Based on a current market rate of 6 percent, the monthly savings would actually be $189, dropping your principal and interest payment from $2,107 a month to $1,918. Do consider that the larger your loan is, the greater the impact of savings.

Keep in mind that refinancing with the lender who currently holds your loan can also save you some money. When you use the same bank, you can further minimize cash at closing by rolling your current escrow balances from your existing mortgage to your new loan and getting a reissue rate on your current title insurance. Your closing costs could be as low as $1,500 since you would also avoid paying state tax stamps and recording fees.

Since every loan is structured differently and every household financial situation is even more unique, the best advice we can offer is to talk to a mortgage banker whom you trust. He or she can do a quick assessment based on your loan and the current rate environment. Their findings will easily help you reach a qualified decision.

Jennie Barrett Shaw is a Realtor with Keller Williams Realty and a Richmond-area resident since 1987. She helps buyers and sellers maximize their investments in real estate by serving as a knowledgeable and ethical advisor. She currently lives in Westover Hills with her husband Travis, and their two yellow labs. Questions for Ask the Agent can be submitted to asktheagent@richmond.com.

 LAST TIME OUT: Answers about assessments.