Should you refinance your home, or should you sell the current house, take the lower rate, and buy more house for your growing family, but still have the same payments as your current loan and smaller house?
Does this make sense?
When rates start going down, people immediately think about refinancing their home to reduce their payments. Of course, having lower payments is always a big plus. Who doesn't like to save money?
On the other hand, are you comfortable with your current payment? Are you able to pay all your other bills, save money each month, and still have some to play? Is your family still growing, or are the kids just getting older and need more room to run around?
Refinancing might not be the answer.
The answer might be, keep your current mortgage payment (or close to it) and buy a newer or larger home, whichever suits you.
For example, your current home is valued at $200,000 and your current mortgage payment, including taxes (2.3%) and home owners insurance (0.80%) (keep in mind that I'm in Texas so your taxes might not be as high as this estimate here), is $1813 with a 6.75% interest rate. If you refinance, you might be able to get down to $1620 with a 5.25% rate and save $193 a month (though it usually costs about $4000 in fees just to close a new loan so calculate how many months it will take for you to recoup your fees along with your monthly savings). You could invest that extra...
Or, you could sell your $200k house, and buy a different house for $225k and keep your $1800 payment, plus invest the profit from selling the previous house.
Just in going from a $200k price range up to a $225k price range, you're opening your options up so much to be able to get into a larger house today with the lower rates, instead of waiting a few years when rates could be back at your 6.75% rate you currently have or even higher. The market fluctuates constantly, and it's hard to predict what might happen in 3-5 years, but if you know you'll probably want something larger in 3-5 years, you might want to rethink that time frame as rates hedge more than 1.5% lower than what you currently have.
Food for thought...