Refinancing your mortgage is a big decision, and one should look at all the options available before choosing any one plan. Refinancing means you want to replace the mortgage you have now for a lower rate so you can save on what you are paying each month. You might do this because you want some cash in hand to make a large purchase, or to consolidate other bills with high interest rates.

To refinance your home or business in todays market, you need to consider exactly what your savings will be, along with whether it is reasonable to refinance now or not. With mortgage rates down from what they were just a couple of years ago, refinancing just might save you some money on your mortgage payments in the long term. The rule of thumb is: if you can get a new mortgage rate of at least 3 per cent lower than your current rate, refinancing will get you financial savings over the term of the existing mortgage. To determine how much you will save, you will also need to look at your new closing costs and subtract them from your final saving figure.

If you have a variable mortgage rate now, you might want to look into changing it to a fixed rate mortgage. Having a fixed rate mortgage means your interest stays the same throughout the term of your loan. You may miss the chance of decreased payments due to a good market, but you also avoid the risk of market dips causing your mortgage payments to spike. Furthermore, even though you establish a limit on how much a variable mortgage rate can increase, you don't know if your current payment will go up when the adjustment period ends.

If you are considering refinancing and are offered an ARM (adjustable rate mortgage), be aware that this type of loan is usually only given to people with poorer credit ratings. Your rating may have improved since you first got a mortgage, so check your credit score before applying for another mortgage to be sure you get the best loan available. You can get one free credit report per year, and it is advised that you look into your rating before making any efforts toward a new mortgage.

A mortgage adviser will be able to help you find the right options for your situation. You will need to be upfront with him and explain all the financial mishaps you have been going through. However, once you do this, he or she can then scan through all the information from the lenders and explain to you which program is best suited for your needs.