Today’s refinance rates may tempt you

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Recent refinance rates may be tempting. But refinancing is not always the best decision. So how do borrowers know if a refi is the right move?

Most people who refinance have a simple goal: to secure a lower mortgage rate. If you have a little equity in your home and a large monthly payment, you might benefit from the historically low refinance rates as of late. If you are currently underwater on your home loan, refinancing is a lot tougher.

Current low refinance rates can also set the stage for a switch from an adjustable-rate mortgage, or ARM, to a fixed-rate loan. That’s a good option for homeowners who plan to stay put for a while and want the security of a fixed rate. Some borrowers may even benefit from switching from one hybrid ARM to another to extend low refinance rates for a few more years.

Refinancing may also be a wise move for those who want to get rid of a second mortgage and hold just one loan. Rates for home equity loans can escalate over time, so many people prefer to consolidate both loans at once.

Finally, borrowers can take advantage of low refinance rates for personal reasons, such as investing in their small business or start a new one, or to gather funds to pay a child’s college tuition or to loan money to a family member.

A refi can also makes sense in the event of a divorce, regardless of the current rates, because it may allow one party to remove another from the note.