All too often, people will only focus on the reduced monthly payment when refinancing mortgages. Remember that every time someone refinances, he or she is taking on a new term. If you have only eight years left on your loan but then refinance to a new 15-year mortgage, your payments may be lower, but you are taking a lengthier time to pay the loan back and may be paying far more in the long run.

Also, people tend to misjudge the sense of freedom a retiree has when he or she doesn't have a large responsibility like a mortgage in retirement.

People should contemplate how long they will be in the home, how long they want to carry a mortgage and, most significantly, how much the loan will cost them over the life of the loan, or their life expectancy.

Also, make sure to keep in mind that having a lot of equity in your home offers you choices in case you develop serious health issues that compel paying for long-term health care. If you do a cash-out refinance, in which you borrow against the equity in your home, you could wind up without this prospective source of funds.

Conversely, if someone wants to retire early or has a hardship and there is an urgent need to reduce expenses, it may make good sense to refinance, especially if he or she has at least 10 years left on the current loan and the current interest rate is fundamentally higher than the new refinance rate.

Calculate Your Mortgage Refinance SavingsAre there circumstances where it might not make sense to refinance, even to a lower rate, for people in this group?It would be best not to refinance if you were going to move in five years or are extending the loan out too long, thus increasing the overall cost of the loan. Also make sure that closing costs will be paid back over a reasonable time frame.This may be a sign of a cash flow problem. People who do this are looking to stretch out their fixed obligations so they can spend more on the flexible, fun items in the budget. Sadly, some people tend to spend the savings and then some, and become serial refinancers.