Mortgage refinancing is when you take out a new home mortgage, and use some or all the money to pay off an existing mortgage on your home. So is mortgage refinancing a good or bad thing?

If you refinance to get a lower interest rate that is a good thing. The major reason people refinance is to get a lower interest rate, often a fixed rate mortgage after an adjustable rate mortgage, or to lower their monthly payments. If you refinance to extend the mortgage period, that isn't so good. Remember that if you extend the term of the loan, you will decrease your monthly mortgage, but you will end up paying more total interest over the years. Also, later in life you will still be paying on a mortgage. 

If you make the decision to refinance your mortgage, make sure it is worth the upfront cost long-term. When you refinance you have to pay for closing cost again. Also, you will pay for an application fee, appraisal, origination fee, and any interest buy-down points. Bottom line, mortgage refinancing can be costly. If you decide to move before your refinancing has paid for itself, you will have not saved but wasted money. Try to look for a mortgage that has no-points and no closing cost.

There are two different types of refinance mortgages: no cash-out refinancing, and cash-out refinancing. 

No cash-out refinancing.

Cash-out refinancing.

Cash-out refinancing occurs when you borrow more than you owe on your current mortgage. You are generally limited to borrowing no more than 75 to 80 percent of your home's appraised value with cash-out refinancing. You can use the excess cash in any way you wish.

One of the main reasons to refinance your mortgage is if you have an adjustable rate mortgage (ARM), and you refinance to a fixed rate mortgage. The ARM, which was attractive in the beginning because of a lower introductory interest rate, may reset at a rate well above your expectations or ability to pay. The virtue of a fixed rate mortgage is its predictability. If you refinance to a fixed rate mortgage, it should be similar to your ARM rate or lower. 

The bottom line, there is a lot to think about in refinancing a mortgage. It's not just about getting a lower monthly payment by a few dollars. You have to determine if refinancing is a good or bad thing by weighing lower interest rates against fees and closing costs, how long you plan to live in the house, the type of refinancing and the health of the real estate market. Only you can decide if it makes sense.