There are so many options available to homeowners today. With rates low, but expected to rise, many homeowners are jumping to refinance while they can. How do you know if refinancing is right for you?

You can look at several things that preliminarily make you a candidate for refinancing. If you bought your home when interest rates where high, you might want to take advantage of the lower rates. You might want to convert your ARM to a fixed-rate mortgage or an ARM with a lower rate and more favorable payment caps.

Refinancing can help you to shorten the length of your loan so that you will gain equity faster. If you’ve already built equity in your house, you may want to cash out the equity to pay for education costs, pay off high interest debt or to make improvements. This is called cash-out refinancing. You may find that you need to just consolidate all of your debts into one low interest mortgage.

In general, refinancing is a good option if you refinance into a loan at least 2% lower in rate than your current mortgage. You need to plan to stay in the house for three years or longer. For example, if you want to break even between your closing costs of $2,000 and the savings of $100 a month in mortgage payments, you need to remain in the house for at least 20 months. You have to figure the numbers for your own situation to determine your plan of action.

Start with asking your current lender what they can offer you. They will usually agree to waive certain fees and costs, and offer a refinancing package to you. If you have good credit, you can usually have your application fees waived because there is less risk you will be turned down.

You will be required to pay for a title search to examine the public record to confirm the ownership of the property. Title insurance insures the bank for a specific amount of loss caused by problems with the title. If you can keep the same insurance company for your title insurance, you can often have it reissued at a rate that saves up to 70%. If the latest title search was performed 3 years ago, you won’t really need a new full search, it depends on the insurer.

You will be charged loan origination fees for the lender’s work in processing your loan. An appraisal fee will estimate the value of your home. You may find that you need to pay points on your new mortgage. Points are due at closing, so calculate whether points paid today will offset a higher APR tomorrow.

If you existing loan has a prepayment penalty you could be facing a significant cost of up to six months of interest on 80% of your balance. Figure this into your refinancing; it could make the difference in whether or not to. Some states prohibit these prepayment penalties, so you may be in luck.

There may be the loss of tax savings due to less tax-deductible interest payments. In most situations, you won’t be affected enough to bother with this.

You should always make sure that all closing costs are disclosed to you well before closing. Many lenders are advertising “no-cost” or “zero-cost” refinancing. This only means that the lender fees are included in your new loan or that you will have a higher interest rate.

Refinancing is a big decision. It takes as much time and effort as securing your first mortgage. You should look at all the numbers and options before you make your decision. Only you will know what is best for your family’s financial future.