How to Refinance: When and Why You Should Refinance

By Karen Lawson
Local Lender Columnist

Advertisements for mortgage refinancing often emphasizes current mortgage rates as the primary reason for "refinancing now." If you have an adjustable rate mortgage that's due to go up, it may be time to refinance to a fixed rate mortgage, even if current fixed rates are higher than your present ARM rate. Your financial circumstances and long-range plans are also important considerations.

Assessing the Cost of Consumer Debt

Like many Americans, you may carry significant balances on several credit cards and consumer loans for furniture and cars. It may be possible to refinance your mortgage and consolidate these debts at a much lower interest rate than you are presently paying on your consumer debts. Consider the rates you're paying on consumer debt along with the possible tax benefits of refinancing.

Exchanging Exotic for Plain Vanilla: Refinance to a Fixed Rate

Another reason to refinance is to convert your adjustable rate mortgage into a fixed rate loan while rates are still relatively low. If you plan to keep your home for some time, a new fixed rate or hybrid ARM fixed for 3 to 10 years could be a great way to stabilize your mortgage and avoid paying more in the long run. Knowing when and why is an important part of knowing how to refinance.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.

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