Interest rates are, to many homeowners surprise, currently hovering around 6%. With 8% or less considered a good mortgage rate, today's rates are making homeowners drool. Many owners are hastily taking advantages of these rates before they rise again. However, some careful and strategic thought should go into a decision to refinance, and one should ask the following questions to determine whether refinancing is really as glamorous an option as it sounds.

"What is my current rate?" If you bought in 2000 when rates were near 8%, you stand to save a considerable amount by refinancing. About $500 per month on a $300,000 mortgage. However, if you purchased last year at 6.5%, you stand to save about $125 per month by refinancing on that same mortgage. Beneficial perhaps, depending upon your future plans. Which brings me to the next question.

"How long do I plan to own my home?" If you are planning on living in your home for the life of the mortgage and beyond, a lower rate is a no-brainer. Why pay more when you can pay less? However, if you are planning on selling your home in , let's say, two years, the decision is not so cut and dry. Let's use the above example again. Refinancing a 6.5% mortgage down to 6% saves you $125 per month on a $300,000 mortgage. However, there are costs associated with refinancing. An appraisal, underwriting fees, and other closing costs add up and could easily total $2000 for this scenario. Therefore, in this case, unless you were certainly planning on living in your home for more than 16 more months, this refinance wouldn't save you a dime. Live there for only one more year, and refinancing will actually cost you. Knowing your future plans is essential to determining how beneficial a refinance actually is.

"What other factors will affect my rate?" For example, if you are currently in an adjustable rate mortgage (ARM) or other unconventional mortgage and plan on staying in your home for awhile, refinancing may be saving yourself from the agony of a potentially skyrocketing rate. Another consideration is your credit score. If you have been late paying a few bills, or if you have recently paid down credit card debt, your score could be significantly different than when you initially bought your home. This will affect the rate you qualify for with your lender. Knowing your current score will help you determine if it is advantageous to refinance. Arming yourself with this information will allow you to talk knowledgeably with your broker, as well as make an informed decision. If you are still unsure, sit down with a broker you trust. It may cost you $35 to have them pull your credit and run the numbers, but that's nothing for the piece of mind it will provide.

A home is the largest expense in most people's budget. Paring down housing expenses can save a homeowner thousands annually. By asking yourself a few simple questions, you will know whether refinancing your home is worth going forward with, or whether your current situation is what is best for you.