Six best reasons to refinance your mortgage

To pay off credit card debt

A great way to save more in the long term is to pay less interest on consumer debt like personal loans and credit cards. Typically, people consider paying off their debt with a cash-out refinance when thinking about refinancing to reduce interest on their consumer debts.

Whether or not this is a good or bad reason to refinance depends on you. For instance: it could mean that you end up with more debt than you began with if you do not have self-discipline, if your financial situation is unstable, or you do not have a multi-month emergency fund. 

It is a possibility, if you have a lot of debt, that your debt-to-income ratio is too high or your credit score is too low to qualify for mortgage refinancing. It could also mean that you will not get the best mortgage rate. 

To get rid of PMI

Private mortgage insurance, or PMI, costs you money each month. If you have 20% equity in your home on a conventional mortgage, however, you could request your lender cancel PMI—if you have a decent payment history, there are no liens against your home, you are current on your mortgage, and the original value of your home has not declined. As long as you are current, your lender will be required to cancel it after you reach 22% equity.

If you want to get rid of PMI more quickly, refinancing may be one route to take. It could be a costly way to get rid of PMI, however, since you will have to pay closing costs to refinance. Unless it is giving you other benefits—such as a lower interest rate, or if the break-even period is short enough—refinancing to get rid of PMI may not be worth the trouble. You will have to weigh the cost to refinance versus how much you will pay in PMI before your lender is willing to cancel.