Knowing the perfect time to refinance your mortgage would be a bit like being psychic. About the best you can do is keep one eye on the prime lending rate and the other on searching for broker whose standard charges and fees will save you a significant amount on the average loan. Of course, the truly important question you need to ask yourself isn't when to refinance, it's:

Is the reason I want to refinance worth the effort?

Refinancing can be worth the effort, but it won't make sense for everyone. Most sources say that considerations ranging from how long you plan to stay in your home to the prevailing interest rates will play a role in the potential value of refinancing.

Like many homeowners these days, you've probably been listening to almost nightly news reports touting record breaking housing sales and lower than ever interest rates. So perhaps you've been considering mortgage refinancing to take advantage of the upswing in the marketplace.

To:
    · Make structural improvements that will help build the equity in your home faster.
    · Find a loan with a lower interest rate.
    · Switch loan types.
    · Take advantage of your improving credit score to get a better deal on a loan.
    · Use the cash equity you've built up to make a major purchase, pay for a child's college tuition or consolidate your credit debt.

First, home improvements seem to come in two categories. Either you splurge on something for the sheer pleasure of it — that Italian marble hot tub from "Scarface" for instance or a skylight Batman would find it impossible to resist. Or you go the practical route and buy a more energy-efficient furnace or put in designer kitchen that Nigella Lawson would envy—to increase the market value your home.

Obviously, the former isn't necessarily the best reason to refinance, but the latter is always a good idea. Building equity faster is one of the safest and most profitable investments you can make in your future.

Secondly, if you can find a lower interest rate and better terms, refinancing will lower your monthly payments and your monthly expenses. Today, the fixed rate on an average 30-year home mortgage is 6.5% — a historic low. By comparison, the rates on one-year adjustable mortgages are their highest level since 2002.

These rising rates have driven a growing number of borrowers to shun the risk of an adjustable mortgage rate, and take advantage of the stability offered by a long-tern fixed rate mortgage loan.
Finally, tapping into the equity in your home can offer a relatively inexpensive way to access extra funds. Whether you take out a home-equity loan or by set up a line of credit, you'll have access to today's competitive interest rates. In most cases you'll even be able to write off as much as $100,000.00 of the interest on a loan.

More importantly, thanks to a real-estate market that's continuing to surge, you're most likely sitting on more equity than you realize. If you need cash to pay for college tuition, make a major purchase or to eliminate outstanding medical bills, the first quarter of 2006 may be the best time to find it in your home's equity.

Just don't forget that the stakes are pretty high. Take your time, comparison shop and do your homework. It's the only way to find the favorable terms that can make refinancing worth your while.