An article in the Salt Lake Tribune today discusses when it is advisable to refinance a mortgage. Refinancing activity has been high recently with around 66 percent of mortgage applications being refinanced in October.

The recent changes in the housing market and mortgage rates have made it confusing for borrowers to ascertain what may be a good time to refinance. In general, refinancing makes sense if you plan to stay in your home for a long period of time and you currently have an adjustable-rate mortgage. Refinancing may also be worthwhile if the current mortgage rate is 0.5 percent lower than what you pay. The Salt Lake Tribune article offers this example: If you are five years into a $200,000, 30-year loan at 6 percent, you can cut your monthly payments by $125 by refinancing at 5.5 percent.

However, it is important to remember that refinancing costs you time and money. So before deciding to refinance, it may be a good idea to add the points and closing costs to see if refinancing will actually save you money. 

Mortgage rates are now expected to climb up again over the next few months as the economy begins to recover. In that case, homeowners with adjustable-rate mortgages may want to consider refinancing into fixed loans, and lock in affordable monthly mortgage payments over the long term. But if you plan to sell your home before the adjustable-rate mortgages reset to a higher rate, refinancing may not be the right option.

While deciding to refinance, several other factors should be considered, such as an improvement in your credit rating, an increase in your annual salary or if your home equity has increased by over 20 percent.