The first question to ask prior to refinancing is, "Why?" For what purpose are you planning to refinance?

Assuming it's to get into a lower-rate mortage of some type, it is usually best to refinance only if you're going to gain at least a 1% less interest rate. This will increase in proportion to all the other fees that are associated with buying into a new mortgage.

When refinancing, the general rule of thumb is if you're going to be in the next property for less than 5 years, consider an interest-only or some sort of ARM (adjustable rate mortgage). If you plan upon staying for the long term (generally defined as greater than 10 years), consider a fixed-rate loan. These can come in 30-year as well as 15-year loans (in case getting out of debt is a priority).

Use a loan officer that you trust. Get references. Check out the local BBB. If they're willing to sell you something that won't make them as much money as another option, this can be a good starting point. Have them show you what your options are; if you have a good credit score - north of 650 - you should have several options available to you. If not, find someone else.

Learn more about this author, Phil C.
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