Is it time to refinance again? The best way to decide is to compare costs of the refinance transaction to interest savings -- and then predict the future.

Home mortgage interest rates have once again hit the 40-year lows we reached last summer, and many people can benefit from refinancing one more time. How can you know if it makes economic sense for you?

• Recognize that this is the bottom. Interest rates are not going any lower. Now is the time to replace your "interest only" loans that are likely to rise over the next 10 years. The same goes for prime-based home equity lines of credit that you can't pay off within three years. Ditto for any personal debt such as auto loans or credit card balances. Move now to a fixed rate, whatever it costs, and know that you have done the right thing.

• If you have a fixed rate now, find out what you could save monthly on interest alone by refinancing. Compare that savings to the cost of refinancing to calculate your break-even point. Here is the formula: closing cost divided by monthly interest savings equals break-even point. Closing will probably cost 2.5 percent to 3 percent of the balance, depending on amount. If the break-even point is reached in less than three years and you plan to stay in the house longer than that, refinance again.

• If the savings don't quite cover the costs of refinancing or if you plan to stay in the house less than three or four years, consider refinancing with a fixed rate loan under a zero closing-cost option. Your rate will be slightly higher, but because all you do is sign a stack of papers, any interest savings will be immediate and permanent. Expect your rate to be higher by about 70 basis points, or seven-tenths of a percent, depending on amount borrowed.

Here are some common questions:

Q:  What if I have already refinanced five times in the past?

A: It doesn't matter. All the savings of the previous refinancings are already built into your new lower rate.

Q: What if rates go down again?

A: Not likely, but if it happens, we'll all refinance again. Waiting to see if rates go down from here is a bad bet.

Q: Should I use this dip to move to a 15-year term?

A: Only if you are comfortable with higher payments and you absolutely have to have the lowest rate available. Fifteen-year fixed rates are a tremendous bargain today, and the rate spread between 30 years and 15 years is particularly attractive. But 30-year rates are so low now that you won't feel the difference.

Q: Isn't it important to pay off my loan as soon as possible?

A: It depends on your personal financial goals. From a purely economic standpoint, there is no reason to ever pay off your home unless you are unable to find investments yielding a greater return than your cost of borrowing. However, from a risk standpoint, it's always safer to have no debt on your home. If there is any possibility you might be unable to make the required monthly payments, it's probably not wise to borrow for investment purposes. Likewise, if you are unlikely to invest the borrowed funds wisely or have limited experience in this arena, a goal of a free and clear home is a worthy one.

Q: What if my loan balance is below $50,000?

A: Most lenders will not make a loan for less than $50,000. Those that do often charge higher closing costs. Instead, you might consider borrowing more and investing the excess or perhaps going to your bank or credit union and asking for a fixed-rate loan of five years or less with no closing costs. Credit unions are exempt from Georgia intangibles tax rules, so you save $3 per $1,000 borrowed, but their rates are usually higher, so shop around.

Q: What if I own my home debt-free?

A: For many, owning their home free of any debt is a lifelong goal. But for those comfortable taking greater risk, you might consider borrowing for 30 years and buying investments that can be expected to yield more than the cost of borrowing over the long haul. Anyone following this course needs to know they have placed their house as collateral for the loan. Talk with your financial adviser.

Q: What about a five-year adjustable rate mortgage? Isn't that the best deal out there?

A: Only if you are certain you will sell within five years. Many who think they will sell in five years end up keeping their house.

John Adams hosts the "John Adams Radio Show" from 1 to 3 p.m. Saturdays on WGST-AM (640). For more information, visit www.money99.com.