Refinancing & points

[AAM2012]

Can someone explain refinancing and the points thing. Our rate is currently high at 5.875 and I just ran a quick quote on USAA's website and it gives me options from 3.5 to 4.375%.

If I select the lowest rate it saving me $300 a month with it taking just under 2.5 years to recovery my costs. We plan on staying here for quite some time and I am kicking myself in the head that we didn't do this earlier. Also, I think we might be slightly underwater..does that affect whether you can refinance? Would we have to bring money to the table in order to do this?

Also, are there tax implications to doing this?

Sorry I know nothing about this--thanks.

[tardyfortheparty]

If you are underwater you will either have to qualify under one of the HARP programs (I believe your mortgage needs to be owned by either Fannie or Freddie but am not 100% certain) or bring $$ to the table or pay PMI which may change your numbers.

[AAM2012]

We already pay PMI in our current loan.