A home mortgage is one of the biggest financial commitments anyone will make in a lifetime. It can cost hundreds of thousands of dollars and it looms overhead for years, or even decades.

It's easy enough to just send in a payment each month and forget about the loan, but homeowners who take a few minutes at the end of this year to review their mortgage may be able to find ways to save.

Time to refinance?

After months of steadily increasing, mortgage rates reversed course in late May and have steadily fallen. Now, they've dropped far enough that it makes sense for many borrowers to sit down and figure out if they can save money by refinancing. Homeowners with adjustable rate mortgages, people who bought houses earlier this year and loan holders who missed the refinance boom of 1998 should be the first to get off the couch, hit the computer and start checking rates.

A simple calculation based on this year's mortgage statement and future plans can help decide whether it's time to act, experts say. By looking at the costs of refinancing -- and comparing them to the monthly savings provided by a lower rate -- homeowners can determine how long it will take to recoup their expenses. If they plan to be in the home for at least that amount of time, refinance!

A sure thing

The gyrations of global markets bring up another interesting scenario for homeowners.

Consider that, over the long term, U.S. stock market investments typically return between 8 percent and 10 percent annually. This makes mutual funds and similar financial instruments a rewarding investment for many households.

Twists and turns in the market provide more than a few gut-wrenching hours for those who watch the market religiously. But they should also spur more conservative homeowners to consider another way of earning a reasonable return: Prepaying the mortgage. By putting any leftover cash toward, say, a 7 percent home loan, these people are essentially investing at a 7 percent rate of return.

"If they have a high aversion to risk, then prepaying their mortgage is a wonderful thing to do because their return is certain," says Colin Coombs, a certified financial planner with Petra Financial Advisers Inc. in Three Rivers, Calif. "They're going to save the interest rate that's stipulated in their mortgage."

When figuring the benefit of prepaying, don't forget that as the balance is whittled down, so is the tax deduction many people can take on mortgage interest. Someone in the 28 percent tax bracket will actually earn less than 5 percent on every dollar put toward a 7 percent mortgage. And there is a risk that someone caught in a declining housing market would be unable to get at the extra money they had pumped into the mortgage, since the slide would make it difficult to sell a home.

Still, those unable to stomach this year's annual mutual fund statement may want to consider alternative ways to sock away their cash.

Once every two weeks vs. once each month

Let's put it this way: For someone who drives a Lexus sport utility vehicle and doesn't need to worry about money, biweekly mortgage prepayment plans may be a good idea. Ditto for people who need help with budget discipline no matter what. But everyone else should be looking back at the hundreds of dollars they spent on the plans and ask if they're really worth the expense.

All kinds of homeowners face this opportunity during the life of their loans: By sending in a little extra cash each month, they can save thousands of dollars in interest while considerably shortening the amount of time they're in debt.

A simple form of prepayment involves splitting the standard monthly payment into two installments. Rather than pay $600 once a month, for instance, homeowners can pay $300 every two weeks. By the end of a year, they have made the equivalent of one extra full payment.

While this process seems simple enough, plenty of people succumb to the pitches of third-party companies that promise to make life easier by doing the exact same thing on their behalf. These companies offer to gather checks or collect automatic debit payments from customers, then send the money along to lenders.

Unfortunately, these plans typically cost a few hundred dollars to set up. Plus, the companies charge a few bucks to process each deduction. In the end, that means there could be $400 or so worth of charges in this year's mortgage summary that many experts say doesn't need to be there. (Although some companies will refund the cost of their programs for customers who want to opt out of their plans.)

Is paying PMI a good use of cash?

Car insurance. Homeowners insurance. Life insurance. People hate to pay for these products, but at least they get something out of them when an unexpected accident, fire or family loss strikes. Private mortgage insurance, on the other hand, returns nary a red cent to home buyers, who often end up paying about $600 a year.

The coverage, known as PMI, applies to home buyers who have loans for more than 80 percent of their home's value. Since these loans carry a greater risk of delinquency, lenders require that they be protected in case borrowers default. If that happens, the companies that underwrite PMI policies will reimburse them.

Borrowers should be able to cancel PMI once their monthly payments reduce their loan balances to that 80 percent level. This means consumers should review their mortgage statements to see if they've crossed that threshold, and if so, they should call the servicing companies that collect their monthly payments to request the coverage be removed.

In locations where home prices have appreciated rapidly, it might even pay to get an appraisal. That's because the loan balance may no longer equal 80 percent of the property's value, allowing a homeowner to eliminate the insurance.

Getting to 20 percent equity any other way can take time, however. That can mean it makes sense to use spare cash to shrink the loan balance more quickly. Doing this gets rid of the $50 or so being spent each month on PMI, and eliminates a part of the loan's principal, reducing the overall cost of the mortgage.

"I'd jump at it," says Coombs. "You get more bang for your buck ... It's almost a two-for-one benefit because you get rid of $1 of interest and $1 of PMI."

On the other hand, people should consider carefully whether the money they spend to reduce the loan balance could be invested more sensibly elsewhere, says Lovella Richardson, a certified financial planner in Knoxville, Tenn.

"It makes it a lot easier if you just put the calculator to it to see what the yearly PMI payments are, and compare that to what you could get on a return if you didn't" put the money toward the mortgage, she says.

Someone with $50 a month in PMI premiums, for instance, could spend $5,000 to get their $85,000 loan balance down to $80,000 on a $100,000 home. That amounts to $600 in annual savings, more than the $500 that same investment might have made in the stock market at 10 percent. But a homeowner with $40 a month in premiums would only save $480 a year, meaning the money could have earned more elsewhere.