Applications to refinance accounted for close to 40 percent of all [tag]mortgage applications[/tag] in August, according to the [tag]Mortgage Bankers Association[/tag]. And many of those refinancing are homeowners who are watching their once-attractive [tag]adjustable-rate mortgages[/tag] head skyward. Here are answers to a couple of refinancing questions that might strike a chord with many facing similar situations.

The decision to refinance out of your 5/1 adjustable-rate mortgage into a fixed-rate product depends on how long you plan on being in the house, your attitude toward risk and your outlook on interest rates. If this is a starter home or you plan to downsize in the next three to five years, then staying in a 4.5 percent loan during the next three years makes sense. If you plan on staying put, then you need to consider refinancing while 30-year fixed rates are still below 7 percent. If your mortgage has an annual cap of 2 percent and a lifetime cap of 9.99 percent, it would be at least 2010 before your mortgage rate could hit 8.5 percent. Although that’s about 2 percent higher than current 30-year fixed-rate mortgages, you’re not paying any refinancing costs or expenses to stay in your current loan.

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