Smartmoney.com offers advice on the right time to refinance,
If you’re worried that mortgage rates are soon going to rise to the point where refinancing is no longer appropriate for you, you obviously want to lock in a rate as soon as possible.
Then, once you have a rate locked for, say, 45 days, probably the best thing to do is to ignore the direction of interest rates. After all, should rates actually drop, you’re likely to wind up flagellating yourself outside your lender’s office.
On the flip side, if you truly believe that rates are going to fall, then hold off on locking in a rate.
What you most likely don’t want to do is get involved with what’s known as a “float down” option, which is essentially an opportunity to pay for the privilege of getting a lower rate should rates fall while you’re still refinancing.
As tempting as these offers might sound, they aren’t free. In fact, they’ll often cost you another one-eighth of a percentage point on your interest rate. In that case, mortgage rates would have to fall at least one-fourth of a point to make this deal worthwhile. And over a short period of time, that’s not likely to happen.