Interest rates are plunging, and the big question for homeowners is whether it makes sense to refinance at a lower rate.

Today's Wall Street Jouornal has a column that explores the pros and cons. In a very generalized nutshell:

If you are planning to move or even pay off your loan within the next few years, refinancing probably makes little sense because you won't be paying monthly bills long enough for the savings to cover the costs.

.... If you plan to stay in your home for years, and you are currently in an adjustable-rate mortgage, you should strongly consider a refi. ARMs are incredibly dangerous – the financial equivalent of Russian roulette, but with multiple bullets. Refinancing into a 30-year fixed-rate loan may not cut your current monthly payments by much, but it gets rid of the risk that those payments will suddenly skyrocket.

Read the full column, by Brett Arends, here.

Arends says that refinancing will be a good deal for plenty of homeowners. But he also plays the devil's advocate a bit:

Refinancing costs money. And that money, if you invested it instead of spending it on refinancing fees, could earn you a very good return. Especially over a long time period – like 30 years.

Imagine your refinancing costs would be a fairly typical $2,000. If you socked that money away at just 5%, by 2039 you'd have $8,600.

And that's a paltry long-term return.

The collapse in the stock market makes this more compelling, not less. At today's distressed levels, anyone investing over 30 years has an excellent chance of producing terrific returns. If you can earn 9%, then that $2,000 would grow to a thumping $26,500.

Do the low interest rates have you looking at refinancing? Have you gone through a refi, and were you happy you did?

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