When Is the Right Time To Refinance Your Mortgage?

Refinancing your mortgage can help you lower your monthly payment or consolidate some other debts. But, when should you do it?

"If you can't save at least 1 percent or more in interest rate by refinancing, leave it alone," mortgage specialist Bob Rankin said. "If somebody has a mortgage of $200,000 and they can save at least half a percent, they'll save about $300 a month. If somebody has a $70,000 loan and they're saving one percent, they may be lucky to save $100 a month.

Depending on your current interest rate and loan structure, you could be in for some significant savings.

"What if I'm refinancing to pay off $30,000 in credit card debt?" Rankin said. "That $30,000 in credit card debt could be as much as $1,000 a month in savings. Yes, you're rolling it into your mortgage, but you also have the interest, which is 100 percent tax deductible. Now, does that make sense to most people? It depends on your own personal finances."

If you're a recent home buyer, you might think refinancing is out of the question, but that's not necessarily the case.

"There's no magic number how long you need to be in your home before you refinance," Rankin said. said. "Back in 2009 through 2013 we had some folks that were refinancing twice a year because the interest rates dropped so quickly, it behooved them to make the refinance. Other folks it didn't make sense to refinance."

Before you consider refinancing, there some big questions to think about, specifically how long you plan on being in your home and if you'll be looking to sell soon.

"The last thing you want to do is refinance your house and spend six or seven thousand dollars in closing costs, including your escrows, only to sell the house in 10 months and lose that money because your recovery period, meaning your closing costs, the amount of money you're saving per month, it'll take about 36 months to break even," Rankin said. "Everybody should sit down before refinancing. What are our goals? Put the numbers down."

Refinancing can also get you into a better for you loan program, for example if you've been in an adjustable rate mortgage and want a fixed rate, refinancing could be the key to that as well.