Consider refinancing when making ends meet becomes difficult, and you are in a debt trap which reduces your net monthly income and pushes you toward foreclosure. Weigh the pros and cons of this option before going forward.

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Some Key Points to Consider When Refinancing:

1. Reduce your monthly installments. Multiple lines of credit and mortgages bog you down with accumulated interest rates. Reasonable refinancing can reduce your monthly payments and give you breathing room.

2. Break-even time. Although it depends on multitude of factors, the sooner the break-even point comes, the better.

3. “Points” to ponder. Points are one-time percentage costs included in your mortgage. Generally, one point is equal to one percent of the mortgage loan. The higher the points, the lower the interest rate will be. Make your decision depending on your situation.

4. You can reduce your credit risk by paying off high cost interest rate loans.

5. Weigh the option of high closing costs with lower interest rate against no or low closing costs with a higher interest over the same or lesser period.

6. Consider refinancing if you can earn some extra income.

7. If you are going through a divorce, you can refinance that portion of the debt that was shared by your spouse.

8. Secured refinancing will yield the lowest interest rates. You can use your home equity to secure refinancing.

9. Tax matters. Taxes vary when you refinance an existing loan. Consult an expert.

10. Paperwork. None of the above points will do any good unless you accurately complete all the paperwork necessary.

Check the credentials of the lender. Keep away from unscrupulous operators. Speak to past customers for referrals, and don’t rush yourself.