Refinancing your home

You can get a lower rate or payment for refinancing the remaining balance.

You can refinance to leverage the equity you’ve attained.

Refinancing can also take a spouse or other party off a loan, in case of a divorce.

If you don’t refinance the right way at the right time, however, it can do more harm than good. Make sure you consult with a mortgage professional to understand current market conditions and your options for refinancing your mortgage loan before committing to one.

Regardless of the type, you generally shouldn’t unless you can reduce the interest rate by at least 1 percent. Cash-out refinancing can also raise your monthly payment, depending on the cash-out amount.

However, refinancing also involves closing and closing costs, typically 3 to 6 percent. If you can’t afford to pay that amount, you shouldn’t refinance.

A better mortgage rate
If mortgage rates have fallen since you took out the loan, you can often save money by refinancing you mortgage into a new home loan at current rates.

Lower monthly payment
With a lower interest rate, you can get lower monthly payments as well, particularly if your refinanced mortgage has the same payoff date as your old home loan.

More predictable costs
If you currently have an ARM (adjustable-rate mortgage), you may choose to refinance to a fixed-rate loan to lock in your rate for the remainder of your mortgage.

Shorten your term
This allows them to pay the mortgage off faster and save a lot of money in interest over the life of the loan.

Borrow money
With a cash-out refinance, you can borrow against your home equity to obtain funds for any purpose.