The real questions you need to ask your self are:
Can I afford the closing costs? Closing costs can be rather significant. They tend to be at least a couple of thousand dollars. In a recent email from my mortgage company, they estimated $2800 in closing costs. That may not be much to many people, but that is more than 4 times our current monthly house payment (including our escrow account).
Can I afford the additional monthly payment? Often, refinancing to a shorter term mortgage will increase your monthly payment. It may increase by $20 or $200. In some situations your monthly payment may decrease, though that often means an increase in the life of your loan. The problem with adding additional months or years to your mortgage is that you will be getting less equity every month.
Do I have the dedication/will/funds to pay extra toward my mortgage every month without refinancing? This is a huge factor. If you or your spouse lose a job your income is obviously less than it used to be. If making your mortgage payment at all is difficult, you should really consider refinancing to a lower monthly payment, not increasing. If you can find an additional $50, $100, or $200 a month to pay toward your current mortgage and have the will and dedication to continue that route you do not need to pay the bank to change the terms of your loan. Note: if you have a mortgage that has a penalty for paying ahead, this is not really an option.
How much will this decrease my interest? This question relates to how high your current mortgage rate is. If you have a 7% interest rate, or 8% or 9% its very likely that a refinance will save you money. I have heard that a general rule of thumb to remember before considering a refinance is the new interest rate. If the refinance will not decrease your interest rate by 1% or more, it will most likely not benefit you.
So are we going to refinance? Signs point to no. You see, it will decrease our interest rate by less than a percent, cost us closing costs that we would have to put on our HELOC which has an adjustable APR, and would cost us $100 more a month. It makes more sense for us to continue our current plan (double paying the mortgage).
Sure we haven’t double paid every month, but this allows us the flexability to have an extra $600 on months when we have a baby, need a car repair, travel to visit family for the holidays, or anything else that life throws us. Life doesn’t throw us these things all that often so we typically pay extra toward our mortgage. Other people may have a more tumultous life that doesn’t allow them the benefit of dedicating that large additional payment most of the time, but for us this works. Sure we don’t expect to have our home paid off in 6 years, but with this plan, we will likely have it paid off in 10. You know, assuming we don’t move before then.