In February, the newly inaugurated president included the proposal as the stick in a housing plan full of carrots for the banking industry.

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May 1, 2009

The broader rescue plan encouraged, but did not require, lenders to cut homeowners' monthly payments and refinance loans for individuals whose home's market value has sunk below what they owe.

Interest rates are now down to about 4.25 percent and that drop has many wondering if they should refinance.

Without doing all the math, experts say a good rule of thumb is that if you can shave1.5 percent off your interest rate and you plan to be in your house at least another four years you should refinance.

Here's an example.

Refinancing costs on a $200,000 home-to pay the brokers, appraiser and lender fees-amounts to about $5000.

So, if your rate is 6 percent, your monthly payments-principal and interest only-are $1200.

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At a refinanced rate of 4.25 percent, your payments will drop to $984 and that's a monthly savings of $216.

Also, take the $5000 in refinancing costs and divide it by that $216 savings and you get 23, the number of months it will take for refinancing to pay off.

"There are costs involved and we need to weigh whether there's a cost benefit for doing the refinance," said mortgage broker Carisse Busby.

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