When you find your self low interest rate, that is the time to refinance your mortgage. By refinance your mortgage, you can get more desirable rate and terms. Refinancing pays previous loan with the proceeds from new loan, using the same property as collateral. You can also switch from an adjustable rate mortgage (ARM) to a fixed rate or vice versa. Refinancing can also alter the monthly payments, or altering the term to maturity of the loan.

By refinancing an ARM into a fixed-rate one, the risk of increasing interest rates can be eliminated. And if you think the interest rate is going to go down, you can refinance from fixed rate to ARM.

Refinancing lenders often require an upfront payment of a certain percentage of the total loan amount as part of the refinancing process. This amount is expressed in “points”. Each “point” equivalent to 1% of the total loan. Therefore, if the refinance option involves paying two points, then the borrower will have to pay 2% of the total loan amount upfront. If you pay more points, you usually will get lower interest rate.

If you want to know how many you can save with refinancing, try this.