On the surface it seems like a no-brainer. Negotiate a lower interest rate and pay less over the lifetime of your mortgage. The reality is - it is just not that simple.

When considering refinancing you need take a variety of factors into consideration:

How many years remain on the mortgage?
If you’ve paid off a fair chunk of your mortgage it may not make sense to refinance and incur the extra costs associated with refinancing.

How is your credit?
If you’ve been struggling financially and have missed some payments your credit rating may have dropped. The result is you may not quality for a rate low enough to make refinancing worthwhile.

Do you have sufficient equity?
You’ll need at least 20% equity in your home to quality for the best rates. If you don’t have enough equity you’ll have to wait and work hard to pay down the debt.

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Are you refinancing to pay off debt?
Think carefully if you are refinancing your mortgage to pay off debt, especially credit card debt. Unless you control your spending you’ll simply be turning short-term debt into long-term debt that will erode the equity in your home.

Will your income remain steady?
Consider the direction your income is likely to go in the future. Are you a senior on a fixed income or a baby boomer climbing the corporate ladder? If you are a two-income family about to lose one income refinancing may be wise.

Do you plan to move?
The costs associated with refinancing make the process a questionable one if you expect to move in the near future.

Does it make sense financially?
Crunch the numbers to see if the savings from the new loan will offset the costs of refinancing, which range from $4,500 to $10,250. The internet is filled with calculators that will help you do this. Ask your bank or credit union to outline the costs of refinancing including all the points and fees you’ll be expected to pay. Most reputable lenders will disclose the costs, although they technically have until three days after you apply for a loan.

Will you need to pay points to secure a lower rate?
Paying points may not be your best option. Points paid on a refinance can be deducted from your income taxes, but only in small amounts over the 30-year term. It could take many years before the lower rate makes up for the points you pay.

Taking time to fully evaluate what refinancing will mean to you, will help you to make the best, informed decision that you can.