1. Reduce your interest rate & payment. Paying a lower interest rate may save you money every month and may help you build equity in your home more quickly. When refinancing your home to a lower rate, if you can save $100 per month on your monthly payments this can add up to $12,000 in 10 years. A mortgage refinance into a loan with a lower interest rate can be accomplished if current rates are lower than your existing loan, or if you have improved your credit score by decreasing debt. Consumers with the highest credit scores qualify for mortgage loans at the lowest market rates.

2. Pay off your loan faster. Shortening the length of your loan can help you pay down your mortgage debt faster. Typically, shorter-term home loans have a lower interest rate, and since you are paying back the mortgage faster, you may save a significant sum in interest payments.

3. Switch to a fixed-rate loan. If you have an adjustable-rate mortgage (ARM) or a loan with an interest-only option for a certain number of years you may want to consider refinancing into a fixed-rate loan in order to establish a steady monthly payment. While interest rates are historically low, this makes a lot of sense, so that you aren't stuck later on with a higher interest rate and higher monthly payments.

4. Switch to a better ARM. If you have an adjustable-rate mortgage, you may want to consider refinancing into another ARM if the terms are better. A new ARM may have a lower interest rate or have better terms such as lower payment caps or smaller interest rate adjustments.

5. Take out cash. If you have a lot of equity in your home and are interested in debt consolidation, a cash-out refinance may be a good way to accomplish this. If you qualify for a home refinance for more than the value of your home, the lender will give you a check for the balance. In some cases, if you are refinancing your home for debt consolidation, the lender may pay your existing creditors directly with checks issued at the settlement. You may choose a cash-out refinance in order to make home improvements, pay college tuition or even invest in a business.
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