Refinancing a mortgage means paying off your current home loan with a new one on different terms. This is commonly done to take advantage of lower interest rates or to cash out of your current mortgage for a lump sum difference.

Consider refinancing if interest rates are lower than they where when you took out your current home loan or if you can afford to switch from a fixed rate loan to an adjustable rate loan. If either of these are in your favor, it possible to greatly reduce your monthly payments.

Further in cashing out your current mortgage you may also get a sizable return. This is possible if you have acquired a large amount of equity in your home or if you qualify for a mortgage larger than your current one.

Make sure to consider first your current credit rating and debt to income ratio. These figures determine how much you will qualify for in taking out a new mortgage. Also consider the equity you have acquired in your home. If it has only been a few years ago since starting your current mortgage or if you are close to paying it off, it is unlikely that refinancing will be a advisable as there is also the cost of closing and reopening both loans.