The home refinance option has been very popular over the last several years since interest rates have been so low. While mortgage refinancing can be worthwhile, it does not make good financial sense for everyone. Some things to consider before refinancing are:

• how long will you continue to own the property?
• can you afford a higher monthly payment or does it need to be lowered?
• is owning the house debt free a priority?
• do you need to consolidate some bills?
• are there some home improvements that need to be done?
• do you anticipate any major purchases (i.e. children's college tuition, etc.)?

A general rule of thumb is that mortgage refinancing becomes worth your while if the current interest rate on your mortgage is at least 2 percentage points higher than the prevailing refinance rates. This figure is generally accepted as the safe margin when balancing the costs of mortgage refinancing against the savings. We, however, disagree. There are too many considerations to take into account for such a broad rule to be effective or even relevant in most cases.

Most sources say that it takes at least three years to realize fully the savings from a lower mortgage refinance interest rate, given the costs of the refinancing. Again, whether or not that is true depends upon your current situation.

Mortgage Refinancing can be a good idea for homeowners who: ·

• Want to get out of a high interest loan to take advantage of lower mortgage refinance interest rates. This is a good idea only if they intend to stay in the house long enough to make the additional fees worthwhile.
• Have an adjustable-rate mortgage (ARM) and want a fixed-rate loan to have the certainty of knowing exactly what the mortgage payment will be for the life of the loan.
• Want to convert to an ARM with a lower interest rate or more protective features (such as a better rate and payment caps) than the ARM they currently have.
• Want to build up equity more quickly by converting to a loan with a shorter term.
• Want to draw on the equity built up in their house to get cash for a major purchase or for their children's education.

When you're making your decision, there are several things in mind.

First, even a small rate cut can pay off quickly. That's because you can usually find mortgage companies willing to waive the routine home refinance charges such as application or credit reporting fees. Of course, in exchange for low or no up-front costs, you may have to be willing to accept refinance rates that are somewhat higher than the prevailing rock bottom.

Second, if you are planning to stay in your home for at least three to five years, it may make sense to pay "points" (a point equals 1% of the loan amount) and closing costs to get the lowest available refinance rates.

And third, you can avoid laying out cash and still get low refinance rates by adding the points and closing costs to your new mortgage. Does that mean shouldering a lot of extra debt? Not necessarily. If you've had your current mortgage for at least five years, you've probably reduced your balance by several thousand dollars. So you may be able to tack your closing costs onto your new loan and still end up with a mortgage that's smaller than your original one; which, with your lower rate means a lower monthly payment, too.