You may want to refinance your mortgage for several reasons:

• You can get a lower interest rate, which will reduce your monthly payment and often the overall cost of the mortgage
• You may want to consolidate outstanding debt -- for example, by combining a first and second mortgage into a single new one
• You may want to reduce the term of your loan, which while it may increase your monthly payment, will dramatically reduce your total cost

The rule of thumb is that it pays to refinance if you can get an interest rate at least TWO PERCENTAGE POINTS lower than you're currently paying.

But every situation is different. To figure out whether you can save money by refinancing you need to consider:

• How much lower your monthly payments will be
• What refinancing costs you must pay
• How long you plan to stay put
• How many years remain on your current mortgage

Your best bet is to tell the lender what you paid for the house, what you still owe and how much you're paying each month. Have the lender itemize all the expenses involved and estimate your new payments. Then you can figure when you will break even.

If you've been paying your present mortgage for a number of years, deciding whether or not to refinance is a little more complicated. That's because you may have paid off a substantial part of the interest you owe on the loan and begun to chip away at the principal. When you refinance -- which means you're taking a new loan -- the bulk of your monthly payment once again goes toward interest.

A potential lender or real estate attorney should be able to help you compare the combined total interest you'd owe if you refinanced with the amount remaining on your existing mortgage.

People who refinance their mortgages should be planning to stay in their homes at least long enough to recover the costs. This worksheet can help estimate how long it will take before refinancing begins paying off. (The example shows the estimated payback period for refinancing a $100,000 mortgage if an existing loan at 10.25% is replaced with an 8.5% loan. Amounts shown are examples, and will vary by bank and by area.)

You can arrange refinancing to switch from a fixed-rate loan to a loan with a lower rate, from an adjustable-rate loan to a fixed-rate (something experts often advise), or from a fixed-rate loan to one of the hybrid adjustables, such as a 10-year fixed/20-year adjustable loan.

Refinancing moves in predictable patterns. A big drop in rates or the introduction of a new strain of loans provokes a flurry of activity, generally followed by a period of calm. Then the cycle may begin again.

Although lenders can foreclose on, or repossess, your house if you're 90 days behind in your payments, most will agree to less drastic measures. Some possible solutions:

• Add the amount you're behind to the end of the mortgage, which extends the term and cost of the loan
• Renegotiate with the lender to reduce each monthly payment and then pay the difference, plus the amount you're behind, at the end of the mortgage
• Temporarily reduce immediate payments and increase later ones, or make a balloon, or one-time, payment to catch up
• Increase future payments slightly until you've paid up the amount you're behind