According to research done by Freddie Mac, the average rate on a 30-year mortgage in the U.S. dropped below 4% for the first time ever in 2011. Rates on shorter-term, 15-year mortgages are even lower.

For some, this creates a great opportunity to refinance the mortgage. But it’s not the right decision for everyone. Here are four questions to consider:

1. How much equity do you have?

Refinancing may be a priority for homeowners with disadvantageous loan terms or who owe more on their home than it is worth. But these situations can make it difficult to qualify for refinancing. Consult with your mortgage company about whether a different financing package can be structured for your home.

If you do have equity in your home, it’s possible to structure a payment that may be dramatically lower than your current monthly mortgage. If the amount of equity is not much different than the current value, the payment will be closer to what you already have, but would likely be an improvement due to the recent decline in interest rates.

2. Why do you want to refinance?

Locking in a historically low rate can be appealing, but if you are within a few years of paying off your mortgage, it may not make sense for you to re-start with another 15- or 30-year mortgage.

3. Are you in a position to refinance?

If you have run into credit problems, refinancing may not be as easy as it used to be. Households need to have a sufficient credit score — usually 700 or higher — to qualify for a conventional mortgage.

Employment status could be another factor. A number of Americans, some involuntarily, have recently left the workforce and started their own business. If you don’t have an established record of income, it might be difficult to obtain a new mortgage. Ask your mortgage company whether it’s worthwhile for you to pursue the mortgage application process.

4. Determine the terms that suit your needs

The final question is whether to opt for a 15-year or 30-year mortgage. An adjustable-rate mortgage is also an option, but since the terms of those loans are subject to change.

If your primary goal is the lowest possible payment, a 30-year loan makes sense. If your focus is to reduce debt and accumulate wealth, a shorter-term loan may be better; the total interest paid on a 15-year loan will be significantly lower than with a 30-year mortgage. While monthly payments will be higher, a 15-year loan offers more long-term advantages for these homeowners since the financial obligation of a mortgage will no longer exist after 15 years, allowing you to concentrate on retirement or education savings.

If you decide to refinance, be sure to compare costs of different lenders. The breakeven point on the cost of the loan (the number of years you need to keep the mortgage before the costs of obtaining a new loan are overcome) is a critical measure of whether refinancing is a worthwhile move for you.

For more information, please contact Michael W. Yee at (808) 952-1240Advisor is licensed/registered to do business with U.S. residents only in the states of Hawaii. Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Some products and services may not be available in all jurisdictions or to all clients.© 2010 Ameriprise Financial, Inc. All rights reserved.