Conventional wisdom dictates that when interest rates drop 2 percentage points below your current rate, it's a good time to consider home refinancing. However, this isn't always the case. It depends on what type of mortgage you have. If you have an adjustable rate mortgage (ARM) and plan on keeping your home for more than a few years, it may be in your best interest to lock in lower rates by moving to a fixed rate mortgage. If you already have a fixed-rate mortgage, your are likely better off considering the other factors before refinancing.

The debt with the lowest interest rate is almost always your mortgage. Refinance your home when you want to pay a large amount of high-interest debt, such as personal loans and credit card debt, by using the money gleaned from refinancing your home. By paying off your high interest debt and adding it to your mortgage, you can save thousands of dollars in the long run.

Home refinancing can provide extra cash for unforeseen expenses, such as an illness or being laid off. You can lengthen the term of your loan in order to lower your monthly payment. You can also borrow against the equity in your home in order to make home improvements or pay for other expenses. If you are looking to reduce your monthly costs, consolidate debt or simply pay off your home sooner; home refinancing can be a highly beneficial route to take. Look over your options, make sure your credit history is in order and talk to a mortgage broker or lender about refinancing your home.