Mortgage refinancing allows you to get a new loan to pay off the balance on your existing mortgage and lower your monthly payments. You can also take out some of the equity you’ve built up in your home this way. There are other reasons to think about mortgage refinancing. Do you have car loans? Credit card balances? Interest paid on these personal loans is not tax deductible, but mortgage interest is. It makes sense to refinance and pay off your consumer debt so you have only one payment to deal with.

Mortgage refinancing will usually have the same costs as the first mortgage, such as escrows, appraisals, points and title searches. While these fees may be rolled into the loan amount so you have no upfront expenses, you should still know how many dollars are being added to your loan. Shop around, make sure you’re getting a good deal. A general rule of thumb is to refinance if you can lower your interest rate by at least 2%, say from 8% to 6%. The amount of interest saved over a thirty year loan can be significant and if you’re holding a high interest mortgage, refinancing may be a wonderful route to follow.