How do I know if refinance is beneficial enough to me?
When evaluating a refinance, you need to figure out the payback time. Refinancing costs money in closing costs. The payback time is the time it takes to recover the closing costs with the amount of money you are saving in interest.  For example, if the closing costs are $2,000, your payback time is 2 years if it takes 2 years to save that amount in interest with the new interest rate vs. the old one.  To estimate this, look at the difference in interest rate between your mortgage and the new one, and your mortgage balance. For example, let's say that you have $100,000 left on your mortgage, and the new rate is 1% lower than your current rate. In one year, you will save roughly $1,000 in interest. If your closing costs are $2,000, then your payback time is somewhere around 2 years. If you plan on staying in this house longer than the payback time, then it is beneficial to refinance.  There are mortgage refinance calculators online that will calculate payback time more precisely.  One thing to watch out for: when you refinance, if you expand the term of your mortgage, you might end up paying more interest over the long term, even though your rate is less and your monthly payment is less. For example, let's say you currently have 8 years left on a 15-year mortgage. If you refinance to a new 15-year mortgage, your monthly payment will go down, but if you only pay the new minimum payment for the next 15 years, you could end up paying more in interest than if you had just continued with your old mortgage for the next 8 years. To avoid this, refinance to a new mortgage with a term close to what you have left on your current mortgage. If you can't do that, continue paying whatever your current monthly payment is after you refinance, and you'll pay your new mortgage early and save on interest. It would help if we had numbers to walk you through the analysis. Current balance, rate, remaining term, and the new mortgage details.  To echo and elaborate on part of Ben's response, the most important thing is to not confuse cash flow with savings. If you have 15 years to go, and refinance to 30 years, at the rate rate, your payment drops by 1/3. Yet your rate is identical in this example.  The correct method is to take the new rate, plug it into a mortgage calculator or spreadsheet using the remaining months on the current mortgage, and see the change in payment. This savings is what you should divide into closing costs to calculate the breakeven. It's up to you whether to adjust your payments to keep the term the same after you close.  With respect to keshlam, rules of thumb often fail. There are mortgages that build the closing costs into the rate. Not the amount loaned, the rate. This means that as rates dropped, moving from 5.25% to 5% made sense even though with closing costs there were 4.5% mortgages out there. Because rates were still falling, and I finally moved to a 3.5% loan. At the time I was serial refinancing, the bank said I could return to them after a year if rates were still lower. In my opinion, we are at a bottom, and the biggest question you need to answer is whether you'll remain in the house past your own breakeven time. Last - with personal finance focusing on personal, the analysis shouldn't ignore the rest of your balance sheet. Say you are paying $1500/mo with 15 years to go. Your budget is tight enough that you've chosen not to deposit to your 401(k). (assuming you are in the US or country with pretax retirement account options) In this case, holding rates constant, a shift to 30 years frees up about $500/mo. In a matched 401(k), your $6000/yr is doubled to $12K/year.  Of course, if the money would just go in the market unmatched, members here would correctly admonish me for suggesting a dangerous game, in effect borrowing via mortgage to invest in the market. The matched funds, however are tough to argue against. The proper answer is that you run the numbers and see whether what you'll save in interest exceeds the closing costs by enough to be interesting.  Most lenders these days have calculations that can help with this on their websites and/or would be glad to help if asked. Rule of thumb: if you can reduce interest rate by 1% or more it's worth investing.
"I don't like buying individual bonds for my own portfolio.  I actually used to buy long-term government strip bonds (Canadas or provincial bonds) but I stopped.  Here are some reasons why: My broker allows me to purchase bonds via their web application.  However, to sell a bond, I had to call in to the fixed-income trading desk.  That was inconvenient.  (But your broker may be different.) Bonds don't typically trade on a formal exchange.  So, there's no cheap & easy way (as far as I know) to get an independent quote for a bond's value – I had to trust what my broker said my bond was worth when assessing my portfolio performance.   I asked my broker once how they arrive at the ""market value"" shown – i.e. whether it was last bid, ask, or actual trade – and I was told they use a third party bond quotation / valuation information provider for the data, and that quotes are an estimate of what the bond would be worth, based on similar bonds.  I quickly learned that wasn't the value I could actually get when selling it: When you're dealing with your broker to buy and sell bonds, you're likely dealing with theirs or a related investment bank which makes a market for specific issues of bonds.  While I wasn't being charged an explicit commission to buy or sell bonds, it was evident the broker makes money off the spread:  That is, the difference between what they would be willing to sell a bond for and what they would be willing to buy that same bond for.  They will buy your bond back from you cheaper than what they could turn around and sell it to somebody else for.  That's why they don't charge an explicit commission... it's built in and hidden! Anyway, when I finally discovered my broker would seldom actually offer me the ""market value"" quoted for my bonds (typically, it would be bought back for a few percent less than it were theoretically worth), I gave up.  I don't think bonds simply are liquid enough, nor the costs transparent enough for retail investors.  (Or maybe it's just me :-) However, I do think bonds remain an important part of a diversified portfolio:  Bonds ought to be represented in a diversified portfolio using low-cost bond index mutual funds or exchange-traded funds.  Since these funds buy & sell bonds in large quantities, they get a better deal on the spreads.  So, while you do pay an explicit management fee for a fund, you are probably saving since you're not getting shafted on the spreads." "You should spend zero on your stock research company.  If the management of the company actually had persistent skill in picking stocks, they would not be peddling their knowledge to the retail market for a few hundred dollars.  They would rake in millions and billions by running a huge hedge fund and buy themselves a private island or something.  Unfortunately for them, hedge fund investors are not as gullible as retail investors and are more likely to sue when they discover they have been lied to. Many stock ""research"" companies are trying to manipulate you into paying too high a price for stocks.  They buy a small stock, recommend it, and then sell it at the artificially (and temporarily) high price.  Others are simply recommending stocks pretty much at random. You could do that just as well as they can, and for free. Portfolio performance evaluation is a complex problem.  The research company knows that its recommendations will ""make good money"" about half the time and that's enough to bring in a lot of uninformed people.  To know whether your portfolio actually did well you need to know how much risk there was in the portfolio and how a competing ""dumb"" portfolio with similar characteristics fared over the same time period.  And you need to repeat the experiment enough times (or long enough) to know the outcome wasn't luck.  I can say confidently that your portfolio performance doesn't back up the claim that the research company has skill above and beyond luck.  Much less $599 worth of skill. I can also say very confidently that there are no investors with a total of 20 thousand dollars to invest for whom purchasing stock recommendations is worth the cost, even if those recommendations do have some value.  Real stock information is valuable only to large investors because the per-dollar value is low. Please do not give money to or otherwise support a semi-criminal ""stock research"" enterprise." I was in a similar (but not quite as bad situation) a couple years ago, and I had a stroke of luck that helped me, but your friend might be able to force a similar situation. My parents refused to take out the huge parent loan (understandably so), but my dad made enough money that I wasn't eligible for much aid.  My stroke of luck came when they got divorced; I could refile my FAFSA with only one parent (using my mom with very little income), my aid shot through the roof and nearly covered my undergrad (this happened in California, I don't know if this works in other states). My advice for your friend would be to take the 6 units/part time job option, but do what she can to earn enough to pay her own rent/food/other bills.  I think the requirement for filing as an independent is that you supply >50% of your own income.  It won't kick in right away, but for next school year this would end up getting her a lot more money from the state/federal governments.  For me it was enough to cover my school, food, rent, gas, car payment, and still have a little left over. (I don't know if this is still possible, and I know it doesn't work for graduate school, or if it applies to every state.  It might be an option worth pursuing though) Many good answers here, especially that you have to consider that renting may be more expensive than you'd think. Also, keep in mind that rent is money that is completely lost. Even if the property has dropped in value, if you keep paying, you will be able to recuperate part of your mortgage payments when you sell the house. Normally this is about +-30%, but you need to calculate this yourself by dividing the expected sales price of the house by the total mortgage payments you have to make to pack back everything. So I'd say walking away only makes sense if the rents around where you want to live are much lower than (<+-30%) your mortgage payment, and stable. In stead of walking away immediately, perhaps you can refinance your mortgage with a new one? In 2008 the rates were around 5.8%, now they are around 3.6% or so. I don't know how it goes in the USA but in my country, if the rates drop, it is relatively to do this and it can save people who refinance thousands if not more. If you can afford the payments on a 10-year mortgage for a property, that's an indication that it's very affordable.  This assumes that there aren't a ton of hidden costs in this property (which could be why it's going so cheaply). Looking at more expensive houses just because you can afford them is exactly what the lenders want you to do, and it's dangerous.  Resist the temptation.  If you're happy, you're happy. Yes. Borrowing more against your home means you will pay more interest for your home. Specifically:  Does this increase the amount of interest on my home loan by $144.56 per month to start with? Yes, that is exactly what it means. As to whether or not that is a good use of the money, I can't say. You're making various assumptions here... They could be accurate or, if this is your first rental home, they could be wildly optimistic (100% occupancy rate? that won't last). Additionally, houses are physical goods which depreciate. Put another way, they fall apart, and you (as the owner) are responsible for fixing it. You have the basic idea right, I just think you should plan for a worst-case scenario, and it looks like you're planning for the best. If you think of it in terms of trying to get an annual return on your investment over the long haul, you can do a simple net present value analysis to decide your buy price.  If you're playing conservative with the investments and taking safety over returns, you will still have some kind of expectation of that return will be.  Paying slightly more will drag down your returns, perhaps less than what you want to get.  If you really want to get your desired X%, then stick to your guns and don't go down the slippery slope of reaching.  If 1% off isn't bad, then 2% off isn't all that bad, and maybe 3% is OK too for the right situation, etc.  Gotta have rules and stick to them.  You never know what opportunities will be around tomorrow.  The possible drops in value should be built into your return expectations. Borrowing against your retirement is borrowing against your future -- you shouldn't do it expect for the most serious financial crises. The market is down, and 12% is a pretty darn good down payment. You'll hit the threshold where they waive PMI in a few years when you hit 80% LTV, or when you get the house appraised when the market heats up again. Another option is to find a lender that doesn't do PMI. A few local banks and credit unions do this... I managed to find one in my area that doesn't require PMI or escrowed tax/insurance!