Christina Pomoni, Contributing writer

During the current financial crisis, refinancing has become an increasingly popular word. In simple terms, refinancing means adding more debt to your existing mortgage, only with different terms that allow you to pay less monthly. You could use the cash to pay off high-interest credit cards or perhaps even put more into savings.

Currently, mortgage interest rates are close to their historical lows. A 30-year fixed rate loan averaged 5.18 percent at the end of September. A year earlier it was nearly 6 percent. Similarly, 15-year fixed rate was at 4.63 percent, whereas one year prior it was at 5.65 percent.

Someone who finances at those rates from higher ones would have lower monthly payments. And if you want, refinancing enables you to spread your mortgage over another 15 or 30 years. For instance, if you have already been paying your 30-years mortgage for seven years, you have 23 years left on your house. By refinancing, you can spread you loan over another 30 years maximum and pay much less per month because you are giving yourself another seven years to pay back the same amount of money.

Here's an example:

Suppose that, in 2006, you took a 30-year fixed rate mortgage of $207,000 at 6.5 percent. Three years after, you have $200,000 remaining on your mortgage, but your home's value is now $220,000. If you refinance at 5.18 percent, your monthly payments will be reduced from $1,308 to $1,120. That saves $188 per month -- $2,256 for the year.

But requirements for refinancing are quite tight, particularly after Freddie Mac and Fannie Mae have changed the percentage of home value that can be financed. As lenders have tightened the refinancing criteria, homeowners have fewer refinancing options available.

Besides, the mortgage you can choose when refinancing depends on many factors, including how long you plan to keep the mortgage and what do you plan to do with the money. For instance, if you plan to stay in your home for less than 10 years, it's generally not wise to refinance your adjustable-rate mortgage to a fixed rate, especiaily if your ARM was introduced at a very good rate.

If you choose to refinance it in such a short period, that will cause your ARM to lose much of its value. If you plan to stay in your home for 20 years or more, refinancing to get a fixed rate and save yourself from the uncertainty of ARM is a wise move that will save you a lot of money over the life of the mortgage.

Real estate agent Barbara Corcoran says that, since 2008, refinance applications have tripled and the number of people getting approved is significantly higher than ever. Of course, this doesn't make lower interest rates the answer to all the problems of the housing market. However, it allows homeowners to survive until home prices go up again.

Similarly, David Kittle, president of Mortgage Bankers Association, advices homeowners to refinance, but only after examining the costs and savings of the refinance. Some people say that you should wait until the interest rates are at least 2 percent lower than you current interest on your mortgage. However, this 2-percent-rule is rather oversimplification. Kittle's advice is that you should refinance if it saves you at least 3/8 on the rate and you plan on staying at home for at least four years.

Refinancing may mean different things to different people. Some may refinance to get better loan terms by converting a risky ARM to a fixed mortgage rate, while for others it may mean taking cash for home improvements. Many home owners refinance because they want to consolidate their accounts or to borrow against their home equity.

No matter why you choose to do it, do not get greedy. Lock in current rates and do not look for another half-percent lower later.