Refinancing

A few months ago I got a flier in the mail from my bank. It boldly advertised a 4.2% interest rate and no closing costs if I chose to refinance. Intrigued I called to learn more, I decided against that deal after learning that the refinance must be a 15-year loan and I couldn't include my taxes and insurance in the monthly payment. However, I was encouraged to call my original lender to learn more about refinance. Here's what I found out.

My mortgage is through Bank of Oklahoma and their mortgage division was able to able to offer me an interest rate of 3.8% and the closing costs would be rolled into my loan. The only up-front cost would be a $400 underwriting fee. Plus my loan could still include taxes and insurance and I had the 30-year option. Altogether my loan would be about $2000 more, but my monthly payment would go down by about $100. I decided to go for it, which in retrospect wasn't a great decision for me.

Things started going downhill after I paid the $400 underwriting fee. That's when the mortgager called me to tell me that the secondary loan I had on the house (the grant from the Tulsa Housing Authority was classified as a secondary loan) would have to be paid off if I refinanced. My lender ended up rolling the cost of the grant into my refinance, but that added a grand total of almost $4,000 to my loan. If I hadn't already paid the underwriting fee I would have given up the whole idea, but in the end I decided that the lower interest rate and smaller monthly payment would make the refinance worth it since I already had money invested in it.

Have any of you refinanced with the lower interest rates? Was it a good experience or a disaster?