According to Freddie Mac’s quarterly Refinance Report, one-half of borrowers who refinanced their conventional loans lowered their annual mortgage interest rate by at least 17 percent, or about 1.1 percentage points below the old interest rate. (See my post on the Refinance Report from 1Q 2009 here.)

In the aggregate, the interest rate reductions add up to about $3 billion that these borrowers will save over the first 12 months of the new loan.

Low interest rates would ordinarily spur a tremendous amount of refinancing activity. But the collapse of home values during the housing crisis meant few homeowners could refinance under traditional guidelines. Freddie Mac vice president and chief economist Frank Nothalf says from April through the end of August, more than 94,000 borrowers were able to refinance because of the Homeownership Affordability Refinance Program (HARP), according to the Federal Housing Finance Agency, with “the bulk of those occurring in July and August.”

Refinancing is more than a water cooler discussion about who got the lowest interest rate. The Rule of Thumb has changed for mortgage refinance. You have to consider the following:

1. Can you lower your interest rate?

2. Can you lower your monthly payment?

3. Can you shorten the term of your loan? Shaving years off of your loan is worth doing, even if you can’t lower your monthly payment.

4. How much will the refinance cost you? Lenders are changing a few hundred to a few thousands bucks to do a refinance. Shopping around will pay off big-time.

To read Ilyce's complete article, logon to CBS MoneyWatch.