Is it too late to refinance? Maybe not

You may think that you missed the boat on a mortgage refinance, with rates now climbing after years of historic lows. Not so fast …

Mortgage rates actually fell again in March. It’s likely a combination of wary investors and caution on the part of the Federal Reserve that influenced the slight decline in rates. Nevertheless, it just goes to show that you still have time to refinance before interest rates experience any significant rise.

However, make sure it’s worth it. Here are three common reasons borrowers refinance and what factors to consider before you dive in.

Get a lower interest rate

Has your credit score improved? Has the market changed? Either of those conditions might give you a lower monthly payment without a significant change to the amount you owe. A rule of thumb is that you need to reduce your interest rate by more than 1.5 percent to offset the costs of a refinance.

Cash out

Home-equity loans and home-equity lines of credit aren’t the only way to capitalize on your home’s equity. You can also refinance. If you owe $100,000 on a $200,000 home, you have $100,000 in equity. In a cash-out refinance, you refinance your mortgage for more than what you owe and get the difference in cash. The amount you’ll receive depends on the lender and your financial situation.

Shorten or lengthen your loan

Is your current payment a burden? Increasing the term of your mortgage loan will give you lower monthly payments, although you will end up paying more toward interest. Or maybe you have a new job that pays twice your old salary. Refinance the mortgage to a shorter term with higher payments.

Before you commit to a refinance, remember that you don’t change your current mortgage; you pay off your current mortgage and create a new one. That means you’ll repeat the same process you took to secure your original mortgage and incur similar costs.

Talk to your lender to understand the costs, advantages and disadvantages related to your situation.