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Contemplating a refinance of your home but not sure when to start the process? This quick overview can help you determine if refinancing will help you accomplish your financial goals.

First, it’s important to understand that refinancing is merely a restructure of your mortgage debt and is done most often to obtain a lower interest rate.

Many homeowners opt for a 30-year mortgage in order to keep their monthly payment manageable. If you have a primary loan and a home equity mortgage, you may be in a position to combine the two loans and enjoy a more secure payment rather than the fluctuating one associated with a home equity loan.

If you have equity in your home and could use extra money for home improvements or a retirement fund, a cash-out transaction can help you enjoy a comfortable payment while accomplishing more with your savings.

However, the term of the loan can be another motivator. If you have a 30-year mortgage, can afford a higher payment and don’t plan on moving, a shorter-term loan such as a 15- or 20-year mortgage could help you achieve the goal of owning your home free-and-clear, sooner.

So if a low payment, cash-out or shorter term is desirable, make sure the following three factors are in your favor so you can improve your financial situation:

1.) Credit Profile: Most homeowners know that their credit plays an integral role in determining eligibility for a refinance, but it’s important to not only have a strong score, but a history of timely bill-paying on your revolving debt for at least 12 months. If your history includes bankruptcy or foreclosure, make sure a few years have passed, your score has risen and your income can be documented to indicate a pattern of debt responsibility.

2.) Debt-to-Income Ratio (DTI): DTI is the percentage of your monthly gross income that goes toward paying debts. Lenders use DTI to ensure that you can responsibly handle a mortgage in addition to the current debt you carry. The lower your DTI ratio, the better your chances are for approval because you will qualify for more loan products that can meet your needs. Lenders like to see a DTI ratio that is less than 36 percent.

3.) Rate/Term: Do your homework. When you speak to a mortgage professional, you should have a good idea of how long you want to have your loan. Evaluate your current interest rate and compare it to today’s rates. If you can improve your rate by one percentage point or more, a refinance makes sense. If you can consolidate debt or take cash out while maintaining a comfortable payment, a refinance makes sense.

If you plan on keeping your home for many years and currently carry an adjustable rate mortgage, refinancing into a fixed-rate mortgage can give you more security while matching or improving your interest rate. If you have a 30-year fixed and are currently making extra payments to reduce the amount you owe, consider refinancing into a 15- or 20-year loan with a smaller interest rate. You might have to pay points (one point is one percent of the loan amount) to obtain a lower rate, but you will recoup the cost after a certain number of payments, ultimately saving you thousands of dollars on your way to free-and-clear homeownership.

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