Among the questions that clients seeking the help of financial advisors with their debt management tend to pose is the one on ‘just when should I refinance my home mortgage?’ And in answer to the question on ‘when should I refinance my home mortgage?’ numerous resources have been developed by financial advisors keen to answer this question which is almost certain to come up in every debt management or debt counseling session in which the client has a mortgage they are still servicing. So when indeed should one refinance their mortgage?

As it turns out, when to refinance a mortgage depends on a number of factors.

      One, if you are considering making a huge out-of-pocket payment – but don’t want to end up getting entangled in yet another distinct loan - refinancing your home mortgage could be a viable way of getting the money to make the payment, based on your equity on the home. You should do this, however, aware of the fact that by so doing, you will be extending the repayment period on your home loan.

      Secondly, if your credit score is suffering because of the fact that you are fast exceeding what are considered ‘healthy’ income-debt ratios, then refinancing the mortgage loan can help to reduce the portion of your income which goes towards the repayment of the mortgage loan, which can in turn translate into a lower debt-income ratio; and consequently an improvement in your credit score.

      Another good time to consider refinancing your home mortgage is if by doing so you stand to save by anything above 2 percentage points in terms of the interest rate. The monthly savings you stand to get by doing this might just amount to a few hundreds (or a few score) dollars per month, but the cumulative effect can be rather significant, as these savings can translate into savings running into thousands of dollars on the real total cost of the home at the end of the mortgage repayment.

      And if you didn’t make a down payment on your home when you first got a mortgage for it, then chances are that you have been paying mortgage insurance on it every month, as this is usually a requirement for people who take mortgages without making a down payment on their homes. Yet if over time you have acquired considerable equity on the home, you can consider refinancing the loan on it, given that in the new (refinanced) mortgage arrangement, you won’t have to pay mortgage insurance on it; as the equity you have acquired on the house would serve as a down payment for you, eliminating the need for such mortgage insurance. This too, can cumulatively save you considerable amounts of money you would have otherwise ‘thrown’ away.