Can you still save money by refinancing?

As mortgage interest rates have risen over the past several months, you may be wondering whether refinancing can still save you money. But don't jump to any conclusions just yet. There are, in fact, several scenarios where refinancing makes sense, but time is of the essence.

"If we keep going on the same track and nothing changes in the economy, then 4 percent rates are gone and 5 percent is much more likely. So, if you've been thinking of refinancing, my suggestion is to do it sooner [rather] than later," says Jim Duffy, a senior loan officer with Primary Residential Mortgage, Inc., a national independent mortgage banker.

He's quick to point out that for some people, refinancing might not be a good idea. But for many homeowners, refinancing now can really add up to significant savings. So read on to see if refinancing makes sense for you.

Scenario #1: Your Interest Rate is 6 Percent or Higher

If it seems like mortgage interest rates have been rock-bottom low for ages, think again. As recently as 2007, they were well above 6 percent. In fact, in July of 2007, the average interest rate on a 30-year, fixed-rate mortgage was 6.7 percent, according to data from the Federal Reserve, which oversees national monetary policy and the banks.

Of course, if you bought your home seven or more years ago, you're reminded of the higher interest rate every month when you make your mortgage payment. But good news - you did not miss your chance to save money through refinancing, says Duffy.

If you can lower your interest rate by at least 1 percent, it makes sense to refinance, he explains. Refinancing will likely cost 1 to 2 percent of the amount of the mortgage, so the rate needs to be at least 1 percent lower in order to recoup those costs in 12 to 18 months.

And the current 30-year fixed rate is much lower than it was seven years ago. As of March 13, it was 4.37 percent, according to Freddie Mac, one of the nation's largest mortgage holders. So if you have an interest rate above 6 percent,  here's an example using a $300,000 fixed-rate 30-year mortgage* to illustrate how much you could save by refinancing:

That's a savings of $439.

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Scenario #2: You Plan to Sell Your Home in the Near Future

With fixed rates at historic lows, an adjustable rate mortgage may not seem like the best option when compared to a fixed-rate mortgage. But refinancing to a hybrid adjustable-rate mortgage (ARM) may be a great option if you plan to sell your home in the near future.

In case you're not familiar, a hybrid ARM is a mortgage in which the interest rate stays fixed for a certain amount of years - anywhere from one to 10, says Duffy, then adjusts annually based on an agreed upon financial index.

And here's the key: The initial fixed interest rate is typically lower than the 30-year, fixed rate, says Duffy. For instance, as of March 13, while the 30-year, fixed rate was 4.37 percent, the 5/1 ARM (which means fixed for five years, then adjusts every year) was 3.09 percent, according to Freddie Mac.

"It's a good move if you're going to move," says Duffy. More specifically, you would need to refinance to a hybrid ARM and move within the fixed rate period, before the rate adjusts (within five years in the example above) and your monthly payments increase.

However, you need to be fairly certain that you'll be moving within the fixed rate period, because we're in an environment of likely rising interest rates for years to come, says Duffy. "So on a 5/1 arm, in year six, the rates are likely going up considerably," Duffy says. You won't want to be holding onto your mortgage then.

Scenario #3: You Currently Have an Adjustable-Rate Mortgage and Plan to Stay Put for Awhile

An ARM may seem like a dream now with its low interest rate, but if you plan on staying in your home for awhile, it could quickly become a nightmare. Why? Once your ARM passes the initial fixed-rate period, your rate will keep adjusting for the life of your mortgage, says Duffy. And most economists believe that interest rates will only go up, notes Duffy. Put simply, he says: "Rates can't get much lower, but they can go up a lot."

[Do you want to score a low mortgage interest rate? Click to compare rates from lenders now.]

So if you don't plan on moving soon, it could make sense to refinance your ARM to a fixed-rate mortgage, says Duffy. If you don't refinance, you might be faced with fickle interest rates that will likely shoot up during the remainder of your mortgage.

"Even though it might go from 3.5 to 4.5 percent, that's the worst [homeowners] will experience. They'll be happy they did it within a few years, because rates are only going up over time," he says.

Scenario #4: You Want to Cash Out Your Mortgage to Pay for Other Financial Expenses

Did you know that the interest rate on your credit card is typically higher than the interest rate on your mortgage? The good news is that you can make this work to your advantage with a cash-out refinance.

No, that doesn't mean you cash out and sail off to the South Pacific in a new yacht (although, that is an option). It means refinancing your home, taking out a larger mortgage than needed, and the lender pays you cash for the difference. Essentially, you would be "cashing in" a portion of your equity to pay off another higher-interest expense, e.g. credit card debt.

Since credit card interest rates are generally much higher than mortgage interest rates, you can save much more over time if you pay off your credit card and only make payments toward your mortgage every month, Duffy says. In addition, he says, another advantage of mortgage debt is that interest payments on your mortgage can be written off on your taxes, whereas credit card interest cannot.

With the average consumer credit card rate for the "overall market" at 16.99 percent as of March 15, 2014, according to rate monitor IndexCreditCards.com, that's quite a bit of savings when compared to today's low mortgage rates.

A cash-out refinance could also help homeowners pay for their home improvements. Instead of using a high interest-rate credit card, they could use the money from a cash-out refinance to pay for the renovations.

If you do decide to go for a cash-out refinance, Duffy stresses that discipline is needed, especially in the case of credit card debt. It's a smart financial move to clear your credit card debt, but it's a dumb move to run it up all over again after paying it off.

[Ready to refinance your mortgage? Click to compare interest rates from lenders now.]

Scenario #5: You Have More Money Now (Than When You First Took Out the Loan)

Did your salary increase dramatically since you first took out your loan? Or did one of your investments pay out well? No matter the reason, if you find that you have more available cash now, compared to when you first took out your home loan, you might want to consider refinancing to a shorter-term loan to pay off your mortgage faster and save on interest.

A shorter-term loan will come with a higher monthly payment, but since you have more expendable cash, it hopefully won't hurt your wallet too much. However, refinancing now, before rates shoot up, is vital.

"It could make a lot of sense for someone to refinance to a shorter term mortgage while rates are still relatively low," says Duffy.

To see how much you can save, let's check out a comparison of a 30-year fixed-rate mortgage and a 15-year fixed-rate mortgage, which typically has a lower interest rate. We'll use a mortgage of $300,000 at the rates quoted by Freddie Mac on March 13, 2014.

In this example, you would own your home outright in half the time and save a whopping $156,048 in interest. As you can see, if you can bite the bullet and pay more monthly now, it would be worth it in the long run and pay off in six-figure savings.

*This example doesn't take into account the fact that your principal would be lower after years of payments, so your new mortgage would be for less money, resulting in an even lower monthly payment than stated in the refinanced figure.