• You must weigh some factors before going in for mortgage refinancing.Large New Ohio Home image by Shannon Workman from Fotolia.com
  
  Refinancing a home mortgage is a decision that mortgage borrowers sometimes consider during the term of their mortgage loan. Refinancing involves taking on a new mortgage on your home and retiring your old mortgage. You should weigh some key financial considerations before going ahead with a mortgage refinancing.
  
  

Interest Rates

• If interest rates have gone down since you first took out your mortgage, you could save some money by refinancing. If you pay a fixed rate of 7% on your mortgage, you could save money by refinancing if interest rates are down to, say, 6% or 6.5%. Another interest rate driver is if you have an adjustable-rate mortgage that is going to adjust to a higher interest rate after a period of time. You may be able to get a better interest rate by refinancing. This will also eliminate your exposure to interest-rate risk considering that you have locked in a fixed rate.
  
  

Home Appreciation

• Another driver for refinancing is home value appreciation. If your home has appreciated in value since you bought it, you may be thinking about tapping into some of that equity. It could be useful for major expenses, such as higher education, medical expenses and home remodeling, and emergency purposes. If you do a cash-out refinancing, you could get a bigger mortgage on your home, pay off your old mortgage, and pocket the difference. Of course, this means that you have a higher mortgage loan to repay. A better refinance driver is to accumulate the equity faster by reducing the term of your loan. If you take on a 15-year mortgage loan and pay off a 30-year mortgage loan, you will build up equity faster.
  
  

Cost Considerations

• While mortgage refinancing offers benefits if you get a lower interest rate, cash out your equity or accelerate buildup of equity, there are costs to consider too. Remember that you are taking on a new mortgage and that involves costs and fees associated with closing a mortgage loan. Just as you did when you first took on a mortgage loan, you will have to incur these costs if you refinance. Each lender's closing costs and fees are different, so you will have to choose who you want to do business with. Refinancing the mortgage may be worthwhile if you find that the benefits outweigh the costs involved.