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First, assess how long you plan to be in your current house. Are there any changes that will preclude you from staying in the house? Will you be moving in two years or retiring? Will you need equity for college or other expenses in the future? The answers to these questions will help you decide whether you will really save money by refinancing.

Next, do the math.

Calculate the monthly payment you would make under the lower interest rate. Then, calculate your monthly savings. Figure out the exact expenses of the loan. Finally, divide the monthly savings into the costs and you'll know how many months it will take to break even.

Remember, the larger the principal balance, the more impact a reduced interest rate will have over time.

Your decision should be based on the answers to your first questions and on the math. If it will take a year to break even, and you will be moving in one or two years, refinancing may not be worth it.