When Does Refinancing Your Mortgage Actually Make Sense?

I bought my first house in 2000 with a 30-year mortgage rate of 7.75%. At the time, I was thrilled with the rate. While the rate was considered reasonable then, I didn’t have a 20% down payment, so I was also paying Private Mortgage Insurance (PMI), which added $250 per month to my mortgage payment.

During the time I owned my first home, 30-year mortgage rates dropped significantly, eventually reaching a low of 5.23% in June 2003. That decline prompted me to refinance my mortgage.