When I was overwhelmed with my student debt 10 years ago, there were two things on my mind: Where am I going to get all this money each month, and am I really going to have to do this for the next 10 years?

Similar thoughts go through your mind when things get tough paying off your home mortgage. There may also be times that you are willing to increase the term of your loan to decrease monthly payments.

There are many reasons to refinance. However, here are the 3 most common reasons I've seen. If you find yourself in any of these categories, start looking into the various refinance packages available to you.

1. Lower your monthly payments

Probably the most common reason for refinancing is to lower your monthly payments in order to ensure that each payment can be made.

There are various ways to lower your payments. One way to do so would be to increase your loan term in order to pay less for an extended period of time.

If you have an FRM and feel that you can't afford your current payments on the short term, but believe you will be able to deal with an increased rate later on, you might want to consider switching to an ARM because its rates will be fixed at a lower rate for a short period of time and then adjust later on when you know you can afford it. Conversely, if you have an ARM it would make sense to switch to an FRM with lower rates.

2. Decrease loan term

This makes me think of my friend George (see "Refinance Rumors"), who asked if refinancing meant he had to extend the term of his loan. The answer is no, and many people choose to refinance primarily for that reason of decreasing the loan term while slightly increasing monthly payments. In the long term this probably will save them a lot of money thanks to a lower interest rate. They will also finish paying off the loan a lot sooner.

3. Cash-out refinancing

Many times there are other important debts people have to pay off or will need to pay off in the near future. Refinancing for more than you currently owe will allow you to receive a large amount of money to pay for these investments, whether it be for college, home improvement, or buying a car. Many times people can do so while getting a lower interest rate. As explained by the mortgage professor, this option should be carefully weighed against taking out a second mortgage (see "Questions about Mortgage Refinancing")