Reasons to Refinance
Lower the Monthly Payment: If interest rates have dropped, refinancing may lower your mortgage payment. This is the primary reason people refinance.
Reduce the Term (Length) of the Mortgage: A drop in interest rates may allow you to shorten the amount of time you pay the mortgage but leave the mortgage payment about the same.
Reduce the Risk on an Adjustable Rate Mortgage (ARM):An ARM mortgage may have enabled you to afford your home but if the interest rate has increased significantly, evaluate a fixed-rate alternative. The risk of further interest rate increases is then eliminated.
Use the Home's Equity: As an alternative to a home equity loan, you may elect to refinance your home for an amount greater than the remaining balance of your mortgage. This is known as a "cash out" loan.
Consolidate Debts: An owner with outstanding loans or credit card balances that have high interest rates can consolidate these loans into one new mortgage.