Put simply, refinancing means paying off your old mortgage with a new one. Most lenders require that you have 10% equity in your home before you refinance.

There are many reasons to refinance your mortgage. First, interest rates may be lower than when you first got your mortgage. If the rate is below 7%, or is 2 percentage points below your current rate, it might be time to "refi."

You may also refinance if you want to trade in your adjustable rate mortgage for a fixed rate one. According to Mortgage101.com, "if you took out an ARM in the past two years or so, you're probably paying 7.75% to 8.5%. By switching to a fixed-rate loan today, you will not only reduce your payment, you will also lock in an attractive rate for as long as you own your home."

If you're considering refinancing your loan, make sure think about the costs associated with the process (it can incur the same closing and opening costs as your first mortgage), and how long you want to stay in the home (as it might take years to recoup the costs).

• Did You Know...?
  Mortgage101.com reports that refinancing points, although paid up front, must be deducted over the life of the loan and not just the year in which you paid. There is one exception, however: If the new loan is specifically for home improvements.

• Did You Know...?
  That means refinancing your loan for more than it's worth. If you only owe $100,000, apply for $125,000 and use the $25,000 difference to save for emergencies, or pay existing debts at a lower interest rate.

• Helpful Hint...
  You can also refinance personal loans, car loans, and home equity loans.

• Did You Know...?
  Fannie Mae, the Federal National Mortgage Association (www.fanniemae.com), Freddie Mac, the Federal Home Loan Mortgage Corporation loans (www.freddiemac.com), and Ginnie Mae, the Government National Mortgage Association (www.ginniemae.gov) are private companies owned by the federal government to help organizations offer loans to first-time buyers. These loans are called different names by different institutions. Generally, you need a good credit record to qualify.

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