Your mortgage may have a term of 30 years, but not many homeowners stay with the same loan for so long. In fact, the average American refinances their mortgage every four years, according to the Mortgage Bankers Association. The AM, as the current mortgage payment and get a new one can mean big savings over several years. However, refinancing comes with a price in the short term, therefore, the AM important to consider both the costs and benefits before making your decision.

Why refinance?

Here are some reasons to consider refinancing your mortgage:

1. To obtain a lower fixed rate. If you took a fixed-rate mortgage several years ago and interest rates have since dropped, refinancing may lower your payments considerably. A $ 150,000 mortgage with a term of 30 years and a rate of 8 percent, for example, carries a monthly payment of $ 1.100. The same mortgage at 6 percent will pay less than $ 900 a month.

2. To switch to a fixed rate or an adjustable rate mortgage. Adjustable rate mortgages (ARMs) offer lower interest rates initially, but some homeowners find the fluctuations of tension. If rates are on the way, you might consider locking in a fixed rate and monthly payments constant. On the other hand, if you want to reduce your monthly payments and are comfortable with changing interest rate on a mortgage can save you money to refinance a mortgage.

3. To reduce your monthly payments. The long-term refinancing will reduce the amount you pay each month. You will end up paying more in interest over the life of your loan, but if Aore having difficulty making your current payments, this strategy could provide some relief.

4. Turn home equity into cash. If you wish, to get a new mortgage with a larger entity, to convert some home equity into cash for a major expense. This is called cash-out refinancing. The advantage of a loan secured by your home is that you can get a lower interest rate than you can with an unsecured loan or credit card. However, if the interest rate offered for your refinanced mortgage is higher than its current rate, a loan or line of credit might be a better option.

Refinancing is right for you?

If Aore refinancing to pay less interest, you won, usually aot see the savings immediately. That the AM because lenders typically charge fees when you take out a new mortgage, and you may also have to pay a fine for leaving your old. To determine if refinancing makes financial sense for you, consider the following questions:

1. How long will it be in your home. If you expect to move in a year or two, never realize the potential savings, AOD obtain refinancing. As a general rule, the longer you plan to stay in their current home, the more sense to refinance.

2. The prepayment penalty on your current mortgage. Many mortgages carry a penalty if paid early. The amount varies but is usually a small percentage of the outstanding balance, or several months worth of interest payments AO.

3. The costs of the new mortgage. When you take a new loan, the lender may charge a number of positions, including application, appraisal, origination and insurance fees, plus title search, insurance and legal fees that can add thousands of dollars. Lenders may also charge discount points that are paid in advance to secure a lower interest rate. As a guideline, expect fees to eat up the potential savings unless your new interest rate at least half a percentage point lower than today.