Important additional reasons include: consolidating personal non-deductible interest loans, such as credit card and auto loans, into one tax-deductible home loan; paying off a balloon payment or a second mortgage; replacing an undesirable adjustable-rate mortgage with a safer fixed-rate loan; taking out tax-free cash for home improvements or other worthwhile uses; and replacing a 30-year mortgage with a 15-year mortgage at a lower interest rate.

That is still a good rule, but refinancing can be profitable today even if your interest rate will drop only 1 percent. The reason is many mortgage lenders now offer so-called "no cost" refinancing, with the loan fees and expenses included in the mortgage's interest rate.

However, before deciding if you should refinance, it pays to shop around because all lenders are not the same. If you are willing to pay refinance costs, such as a loan fee, appraisal fee, title fee and other charges, you can probably find a fixed-rate mortgage around 6.5 percent.