With all the talk of historically low mortgage rates, more and more homeowners are thinking about refinancing their mortgage. While refinancing can present a number of options, it is still a decision that should be carefully considered. When making this decision, the homeowner should factor in the variety of reasons why he/she may want to refinance.

The most obvious reason to refinance is to reduce the interest rate. Conventional wisdom once dictated that in order for a home refinance to be worthwhile, the interest rate that the homeowner is refinancing to should be two percentage points lower than the interest rate on his/her current mortgage. However, today’s low rates may make it possible to switch from a 30-year loan to a 15-year loan at about the same payment. This means you can refinance a 30-year loan to a 15-year loan; pay approximately the same mortgage payment each month, and pay off the loan in half the time. In addition, if there is a first and second mortgage on a property, a rate and term refinance can be used to combine these into one simple payment.

Another common reason for refinancing is to take cash out. Once there is enough equity in the home, that equity can be accessed to take cash out for any reason. If you have high credit card balances, auto loans, personal loans or other high interest debt, you may want to consider a cash-out refinance to consolidate debt. The equity in the home can be used to pay off these balances at a lower interest rate. In fact, cash out refinances can be used to access money for any large expense…a wedding, college tuition, or home improvements.

There are, of course, instances when it simply doesn’t make sense to refinance. On a strict rate and term refinance, if the homeowner can only save a quarter or a half of a percentage point on the rate, it’s not worth it. The closing fees would outweigh the overall savings. The same holds true if the mortgage is almost completely paid off.

If you are considering home improvements, be sure to find out the value of your home before taking a cash-out refinance. Home prices have increased significantly over the past few years. Even if you purchased your home fairly recently, you may be able to sell it for a high profit that would allow you to upgrade to a new house.

There really is no absolute guideline on when the right time is to refinance a home. It has to be a decision based not only on rate, but also financial status, lifestyle and personal preference. It is best to speak to an experienced mortgage consultant who can help you evaluate your options and make the best decision to meet your needs. Talk to your Preferred Empire Mortgage Loan Officer to get details on refinancing your home.