Conventional wisdom suggests that you shouldn't enter into the refinancing process unless the market rates are approximately two percent below your original mortgage lock in rate. This difference should yield a “break even” period of about two to three years for most conventional, middle to high end, American mortgages.

That said, some more innovative re-financiers may want to take advantage of one and a half or even one and a quarter percent differences in the refinancing rate -- if the principal of your loan is high, relative to the costs of refinancing, it may be worth it to refinance at one of these lower rates.

Let's consider some other scenarios in which it's wise to refinance. Let's say that you currently hold an adjustable rate mortgage, and you've recently discovered that your long term income prospects aren't looking as rosy as they once were.

You don't want your financial future to be dependant on a theoretical catastrophic ARM spike. Therefore, you can refinance to a fixed mortgage so that you can budget more effectively on your reduced income stream.

Another possibility is that you want to build equity as quickly as possible in your house so that you can own it and be done with mortgage payments for good. If you refinance to a shorter mortgage loan term, you can create this equity faster.

Of course, if you are going to go this route, make sure that you have a solid asset forecast. If you are going to take on higher monthly payments, it's savvy to work with a financial planner to see how these increased monthly costs may impact your investment portfolio and general quality of living.

Alternatively, you can refinance to draw upon the earned equity in your home to finance certain big ticket purchases. Remember that the duration of time you expect to stay in your house will influence your refinancing calculations.

Finally, you might want to refinance if you're currently using an exotic mortgage instrument, such as a balloon mortgage, and you don't want to face the upcoming consequences of a spiking payment.

In the balloon mortgage example, for instance, you can refinance before the larger payments come due and pass the debt down to your future self. By creating this “time cushion,” you give yourself a window to generate income and asset streams in anticipation of your upcoming refinanced mortgage payments.