by Sheila Attebury

Created on: September 21, 2008   Last Updated: October 21, 2008

The good news is You have a house, and a mortgage to consider remortgaging. But is now the right time? With the economic walls seemingly falling down all around us, is now the right time to make such an important financial move? As with many significant life decisions, the answer is, it depends. Depending on your current situation and the loan terms available, refinancing now may just be the key to riding out this uncertain financial storm.

Remortgaging, also called refinancing, is the process of paying off your existing home loan with a new loan from another lender. There are many reasons to consider refinancing your mortgage in the current economic climate:

To save money - Reduce your interest rate, and your monthly mortgage payment. It's like getting a raise. Be careful though, added points and fees can eat away at any savings you think you are getting. Before signing any documents, do an analysis to determine if the cost of the refinance makes sense for you. A loan with no points and no fees is the best option.

To reduce stress - Change from an adjustable rate to a fixed rate. Life is unpredictable enough without worrying if your loan payments are going to skyrocket due to increasing interest rates. Changing to a fixed rate helps you to plan and budget more accurately.

To take advantage of the equity in your home. Although home values have declined recently, you may still have enough equity to take cash out with a refinance. Most banks will lend up to 80% loan-to-value (LTV) on your home. To determine if you have equity in your home, multiply the value of your home by 80% then, subtract the balance of your current mortgage(s). The result is the amount that you can reasonably expect a lender to allow you to add to your current mortgage balance on a new loan. What can you do with the cash you get from refinancing?

o Planning any major purchases, a car for example? Using the equity in your home can get you a lower interest rate than most auto loans. Even better is the fact that your mortgage interest can be tax deductible. Show me an auto loan that does that.
o Consolidate debt. If you have a home equity line of credit with a variable or high interest rate, an auto loan, or other high interest debt, consolidating it all into one low interest loan can save you money and make monthly bill paying much more pleasant.
o Create a cushion. If you just aren't sure that you will have cash when you need it and wish you had an emergency stash, taking cash out of a refinance may be right for you. Granted, it will cost in the long run as most savings accounts do not yield as much interest as the mortgage is going to cost. However, if you will be able to rest easier at night, it just may be worth the price.

Knowing when to refinance can be unnerving. But with some preliminary analysis and conservative planning, remortgaging now can be the key to your financial piece of mind in these tumultuous economic times.

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