Function

• The purpose of refinancing a loan is to pay off your existing mortgage on your house and achieve more favorable terms on your new loan. Some people refinance to get a lower monthly payment. Others like the idea because it allows them to turn the equity in their homes into cash. You can take out a new loan for another term and use the freed-up funds to pay off your existing mortgage.
  
  

Interest Rate

• One factor to consider is the interest rate of the two loans involved. If you bought your house when interest rates were high, you may be interested in refinancing so that you can get a lower interest rate and payment. If you have an adjustable interest rate mortgage, you may be interested in locking in a specific interest rate with a fixed-rate mortgage.
  
  

Time Frame

• If you plan on being in the house for the rest of your life, refinancing might make some sense. If you plan on selling the house within a few years, the savings that you realize on the monthly payment may not be worth the trouble and upfront costs of refinancing. If you save only a few hundred dollars a month and you are planning on selling the house in two years, it would not be a good time to refinance, according to Iowa State University.
  
  

Reverse Mortgage

• You may want to consider a reverse mortgage instead of refinancing. If you are getting close to retirement, there is a chance that you could qualify. You have to be 62 to qualify for this loan and you must have a large amount of equity in your house. This type of mortgage provides you with a monthly payment and does not require you to ever make any payments back to the lender.
  
  

Investment

• If you are looking to boost your retirement savings, refinancing might be an option. If you can get cash out of your refinance and use it to invest in something that makes more of a return, this could be a beneficial move. For example, you could put the proceeds into a tax-advantaged retirement account so that you can create a source of income after you retire.