Refinancing accounted for roughly 66 percent of mortgage applications in early October, according to the Mortgage Bankers Association, no doubt driven by homeowners' urge to nab those historic lows on rates and lower their bills.

That said, refinancing costs you time and money. You'll most likely benefit from it if:

1. You can lower your rate by half a point or more

It's worth looking into refinancing if the going rate is 0.50 percent lower than your current mortgage if you plan to stay in your home, said Timothy McFarlin, a real estate lawyer based in Irvine, Calif.

For example, someone five years into a $200,000, 30-year loan at 6 percent could cut her monthly payment $125 by refinancing at 5.5 percent. The catch is that the cost to refinance, including points and closing costs, can amount to 2 percent to 4 percent of the new loan's value, eating into savings. Many consumers these days will need at least a 1 percent difference in rate to truly come out ahead, said McFarlin.

Check with the lender that holds the mortgage; it may well offer no-fee refinancing in the hope of keeping your business. Also be sure to approach community banks and credit unions -- they traditionally offer lower rates than big-name chains. Compare at bankrate.com and hsh.com.

2. You need extra cash

It had become standard practice for families to tap their homes' value via home-equity loans to pay off debts or fund college tuition. Now, however, as home prices have plunged, banks have become increasingly reluctant to let homeowners borrow this way.

But people with a lot of equity can achieve the same liquidity through easier-to-access cash-out refinancing. The application process is the same as for a regular refinance, but the new loan will be for more than the borrower now owes, so she can pocket the difference. When you sell your home, the cash-out is considered part of the profit, generally taxable only in excess of $500,000 for a married couple filing jointly.

There's a limit, however, to how much cash you can squeeze out through refinancing. Banks typically want to retain at least 30 percent equity in the new loan.

3. Your adjustable-rate mortgage is resetting before you plan to sell

As the economy recovers, interest rates have nowhere to go but up. With that in mind, homeowners with adjustable-rate mortgages may want to refinance into fixed loans sooner rather than later, said Richard Salmen, president of the Financial Planning Association.

Over the short term, you may miss a year at a low interest rate, because some ARMs are resetting at less than 5 percent. But by refinancing, you could save thousands throughout the life of your loan as rates climb -- and lock in affordable monthly mortgage payments.

The only folks with adjustable-rate mortgages who should not reset are those who plan to sell their homes before their loans reset to a rate above today's averages, Spada said.