Potential

• A new mortgage with a significantly lower interest rate is almost always a positive. The lower rate will save you thousands of dollars in interest over the life of a mortgage.
  
  

Costs

• The cost of refinancing includes broker fees, mortgage points, title insurance, appraisal fees and possible additional costs. These fees must be paid in cash, or they will be added to the mortgage's principal balance.
  
  

Time Frame

• Plan to stay in the house and pay the new mortgage long enough for the lower payment to make up for the added costs of refinancing. Your mortgage broker should tell you how long it will take to recoup the costs.
  
  

Re-ARM

• Switching to a fixed-rate mortgage from an ARM will prevent payment increases if interest rates increase in the future. Refinancing with a new ARM could lead to higher payments in as little as one year.
  
  

Warning

• If your mortgage is five years old or more, refinancing to a new 30-year mortgage could result in higher total interest payments even if the rate is lower. Instead, refinance at a lower rate but with the same final payment date as your existing mortgage.
  
  

Considerations

• Refinancing to a larger mortgage to take cash out reduces your home equity. If home prices fall, your mortgage balance could be higher than your home's value.