So how does refinancing save money? It used to be that the current available rate would have to be at least 2 percentage points below the rate on the existing mortgage. But with low and even no-cost refinance programs available, the "spread" before someone can act with confidence has narrowed to as little as 1 percent, or less in some cases.

Consider a $125,000 home with an initial 30-year fixed-rate mortgage of $100,000. If a homeowner obtained that mortgage 10 years ago, the rate would be about 10.54 percent, according to Bankrate.com data on national averages at the time. Monthly principal and interest payments would be $918, and there would still be a $91,675 balance on the loan today.

By refinancing to today's average rate of 6.55 percent, monthly payments would drop almost 37 percent to $582. Total interest for the 120 months on the higher-rate first loan, plus the interest on the lower-rate new loan, assuming someone kept it for the full term, would be $219,814. Had someone kept the old higher-rate loan for its whole term, the total interest would be $230,383.

In the meantime, however, the homeowner could have taken the extra $336 a month resulting from the lower payments and saved, invested or paid down debt. Assuming even the minimal historical average return in the stock market of 8 percent (a number that was certainly higher between 1988 and 1998), the $80,640 a person would have accumulated during 20 years would grow to $197,911 with monthly deposits of that money, and excluding taxes, fees or other investing costs.

Low-cost and no-cost refinancing, available these days to borrowers willing to accept a slightly higher rate, can make sense too. Rolling costs into the loan also is available. Though these programs carry slightly higher rates, the dramatic drop in mortgage rates overall means they still can be cheaper than what the borrower is now paying.

Brian Carey, an economist for the Mortgage Bankers Association of America, notes that if rates were to fall to 6 percent, for example, rolling in costs would increase the effective rate by 0.5 percent or so. Someone with a mortgage of 7 percent, therefore, could still save money.

A Bankrate.com calculator can help determine how long it will take to recover the cost of refinancing. Or borrowers can ask their lenders for amortization tables on both loans. The tables allow people to check their costs and remaining balance at any point in the loan. The point at which the new loan's savings in interest and monthly payments eclipse the closing costs is the point at which the borrower breaks even.