When it comes to mortgage news, "just the facts" won't cut it for consumers--you want to know how events affect you and what, if anything, you should do about it. A refinance decision involves getting past the "refinance now!" hype and seriously considering your needs and choices.

Refinancing Decision: Your Needs

Homeowners refinance to improve the terms of their home loans. But "improve" means different things to many people. Improvement could be a lower interest rate, achieving greater peace of mind with a fixed rate mortgage, or lowering payments and increasing cash flow.mortgage calculator can show you exactly what your breakeven period is on an interest-saving refinance.

Do You Qualify to Refinance?

That question isn't as easy to answer as it used to be. Fannie Mae and Freddie Mac reduced the percentage of a home's value they will lend on, and tightened their definitions of acceptable credit. Once-common loan products like payment-option ARMs vanished almost overnight. 

If you required a stated income or sub-prime feature to qualify for your current home loan, you will probably not have that opportunity this time around. Or if an ARM reset hurt your ability to repay your loan (and your credit rating), a refinance will be more challenging. A knowledgeable loan officer can analyze your situation and give you some options.

Refinance Products: Choosing Your Next Home Loan

The loan you select for your refinance depends on a couple of things: Your time frame and your needs. Those with shorter time frames have more options. However, the longer your time frame, the greater your potential savings.

• Lower Rate. This can be achieved by choosing an ARM loan, refinancing from a sub-prime loan to an FHA or grade-A mortgage, consolidating a first and second mortgage, or just getting a better deal than you have on your current home loan. Short-timers can choose ARMs or hybrid ARMs like the 3/1, which offers a fixed rate for the first three years. If savings is your goal, make sure that you will recoup the cost of refinancing in less time than you expect to keep that loan. A

• Lower Payments. Interest-only features, or just stretching an existing balance with a new loan of 30 or 40 years, can buy you some cash flow. Special products like reverse mortgages for senior citizens or equity-sharing products can help generate needed cash. And if reducing your total monthly payments is the goal, debt consolidation can have a dramatic impact.

• Fixed Rate Mortgage. Plain-vanilla 30 or 15-year mortgages are abundantly available and you will want to shop a bit (easy to do online) to find the best deal. On these loans a small change in interest rate can add to big savings over time.

Refinancing Emergencies

Homeowners with special circumstances like negative equity or trouble making mortgage payments (due to ARM resets) may benefit from new FHA rescue programs. You might have to get some cooperation from your current lender--either an agreement to reduce your balance or grant a second mortgage to catch up on late payments.