Refinancing a mortgage can be an excellent way to improve your finances, lower your mortgage payment, and use some equity for home improvements, college tuition, or other needed expenses. But when to refinance is a critically important decision you'll be faced with. You're not alone – well over half of all mortgage activity these days is refinancing, thanks to historically low-interest rates and an improving credit picture.  

Check your interest rate. There are two things to consider here. First, if your rate isn't fixed (like a 30-year fixed-rate mortgage), then it might make sense to lock in at today's low rates if you plan to stay in the home for any length of time. Additionally, if your rate is much higher than today's average, it's a sign you should check with a lender. For instance, the average 30-year rate is 3.68% (2.96% for a 15-year loan), and if your FICO score is north of 760, you could likely qualify for a rate as low as 3.34% (2.73% for a 15-year loan). If you can shave a few points off your interest rate, you could realize hundreds of dollars in savings each month.

Don't pile debt on debt. If you're faced with a credit card or some other high-interest debt, utilizing your home's equity (commonly called a "cash-out" refinance) makes much more sense than taking out another credit card or tapping your retirement nest egg.

Get rid of your PMI! If you have an FHA mortgage, chances are you're paying a few hundred dollars each month in private mortgage insurance or PMI. However, if it's been a few years, you might have enough equity (roughly 20% or more) to refinance and drop the PMI. One of the most important things you can do when considering a refinance (or any mortgage product) is shop around. Do your research and make sure you are getting the best available rate and terms.