When does it make sense to refinance a home loan? Depending where your mortgage is, it may not be wise to pay thousands of dollars to refinance.

Q: I was listening to you today on WGN radio and wanted to ask about my Condo loan. I refinance my home in 2000 at a rate of 6.125 percent with a loan balance of $55,000.

I am now 13 years through the 30 years on my fixed rate loan. Doesn’t that mean I am paying off close to all principal on my current loan? My payment is around $550 principal and interest. Any time I questioned banks on going through a new refinancing when rates went lower, they all said my loan amount was too small and they couldn’t do anything for me.

Is something different now that it could make it beneficial for me with low mortgage amount and already 13 years into a 30-year fixed? Being retired, I would sure appreciate having my loan payment lower if possible.

A: The way a straight amortization schedule works is that you tend to pay mostly interest and very little principal in the beginning of the loan term. Those two parts equalize roughly in the middle and by the end of the loan, you’re paying almost nothing in interest but lots in principal.

You’ve probably paid down quite a bit of your loan, and I’m guessing that you have maybe $30,000 left to pay. That isn’t much, so I’m not surprised that lenders don’t want to offer you a refinance. There’s just no money in it for them. Moreover, if you did refinance your loan, the closing costs alone might eat up most of the savings with the reduced rate. It might not be to your advantage to pay several thousand dollars to refinance the loan.

However, you might qualify for a home equity line of credit (HELOC). A HELOC would allow you to pay off your existing loan and get a shorter, fixed-rate loan at a lower interest rate. In addition, since you’ve already paid down so much of your loan, it’s likely that you’ll pay less even if you have a 10-year term.

You can check rates at your local credit union, bank or online lender. However, what you may find is that there aren’t many options available to you that would lower your payments – and the interest rate on HELOCs may be variable, not fixed. As a retired person, you might better prefer the certainty of a fixed rate loan.

If you can qualify, you might refinance your loan and take out a higher loan amount of say $50,000. You might be able to get an interest rate of about 4.5 percent, or 3.5 percent if you went for a 15-year loan. Then, you could simply use the cash you receive at closing for a one-time to pay down the amount you owe.

However, loan fees might still be a problem in this situation, we wouldn’t suggest you obtain a new loan at a lower rate only to pay thousands of dollars upfront in closing costs. We also don’t want you to incur more debt to pay off closing costs.

Why don’t you find a good mortgage lender or mortgage broker to sit down with and go over your options? It’s possible your best option is to keep the loan you have. While you might want lower payments, in the long run, you’ll pay off this loan in another 17 years.