he math seems simple enough in deciding whether you should refinance the mortgage on your home, right? The basic rule of thumb is if the interest rate on your mortgage is 2 percentage points higher than the prevailing rates today, you'll come out ahead by refinancing.

Well, maybe.

There's a lot more to refinancing than just the interest rate. You'll need to factor in the costs of paying off your existing mortgage and any upfront fees and other costs you'll get hit with for closing out your old mortgage and opening a new one. (That's what you're doing when you refinance. You're paying off the existing lender and then borrowing that money all over again.)

Many of these costs are simple to calculate and compare, such as application fees and lawyer's costs. Others can stump you, like amortized "points" and surprise appraisal fees. Even in a no-fee refinancing deal, you need to consider the annual percentage yield rate that you're going to pay for this no-hassle mortgage.

The Real Estate Settlement Procedure Act of 1974 (RESPA) requires an officer of your lending institution to disclose all loan-closing costs within three days of application. However, this may be a "good faith estimate." You'll have to sign the RESPA form as proof that all the statutory disclosures were made.

Federal law requires your lender to quote you the true cost of interest, called the annual percentage rate or APR. This includes the lending rate plus interest, fees, service charges, points and miscellaneous charges.

You also need to consider how much longer you plan to stay in the house. If you're planning to move in two to three years, the extra costs associated with refinancing probably make it not worth the hassle. And with more than a million people in the United States trying to refinance their mortgages each month, it's a hassle.

Refinancing loans currently account for more than half of all mortgage loan applications, according to a recent study by the Mortgage Bankers Association of America. Many lenders are overwhelmed, and you may have to wait a month or longer before getting your new loan.

Still, most of us focus on the interest rate and little else. Here's a list of other important costs to consider before you refinance your loan.

Origination and placement fees are stated before you even apply for a loan. They are very competitive, and many lenders offer a no-fee mortgage. If you do pay these fees, they're tax-deductible.

Other one-time fees are paid later on, but should be determined before you decide to refinance. They include:

Your current mortgage lender may have required you to establish an escrow account to cover land taxes, insurance premiums and any property improvement assessments. These "impounded" monies are held with the lender until needed. In general, the amount held is equal to three months' worth of your insurance and tax payments. The payments are amortized monthly and rolled into your total mortgage bill.

So, your monthly mortgage payment really is a "PITI." That is, principal, interest, taxes and insurance. By refinancing, you may be required to pay more or less toward the escrow account, depending on the lenders' standards.

Points are really extra interest paid at the loan's inception. Each point equals 1 percentage point of your total loan. They raise the yield on the loan, while still giving the interest rate a "low" appearance.

You'll have to balance the interest rate vs. points to calculate which mortgage is cheaper. For example, which is a better deal for you, "7 percent and no points," or "6 percent and 1 point?"

An interesting twist occurs involving points when you refinance your home. You can't deduct all of your closing costs on your taxes in the year you refinance as you can with a first mortgage. You've got to amortize the costs over the life of the loan. And you can't deduct other fees on your taxes.

In Money 99, Decision Center's Bank Rate Monitor provides not only the offered rate, but the actual annual percentage yield, which includes points and other costs.

You may not realize it, but you most likely pay your mortgage in arrears. Most of the time you pay on the first or 15th day of the month, with the principal due on that day as well as the interest that accrued in the prior four weeks. Depending on the day of the month that the refinanced loan closed, interest will be adjusted to start you on a normal schedule.

For example, if you take a $100,000 loan at 7 percent in mid-month and payment is due by the beginning of the month, you'll have to pay two weeks' worth of interest adjustments when the loan closes. The math is simple. Take the yearly interest cost of $7,000 ($100,000 x 0.07) and divide by 365 to give you a daily rate in this case of $19.18. Multiply this by the number of days in the month that you close. This will be your pro rata, upfront interest payment.

There are three kinds of insurance that may crop up when you refinance.

One-twelfth of the annual hazard insurance premium may be included in the monthly payment of your new mortgage. Premiums may be higher or lower than the current loan.

Your new lender may require title protection in its name. (Remember that the home actually belongs to the lender until you've paid off the loan.) If you already carry that for your current lender, the transfer fee may be negligible. If you need a policy, it can cost you.

If your new mortgage is for more money than your current balance, your equity may fall below 80 percent of the value of the home. If so, you'll probably have to buy PMI to satisfy the risk management requirements of the lender. Depending on the size of the loan, PMI can add anywhere from $40 to $100 to your monthly payments.

A mortgage agreement is a contract. At the closing, you'll notice that many of the clauses relate to the rights of the borrower and the lender, rather than the cost of the loan. A downside of refinancing can be more onerous non-monetary terms. You'll want to be sure the new mortgage has terms that are at least as beneficial as your current loan. Watch out for these:

Foreclosure proceedings: These are standard - but do compare clauses of the current and new mortgages.

Unfortunately, a potential lender may not show you its loan papers until you apply. That's because the application fee goes toward preparation of the loan papers. But if you request in writing a copy of the above clauses, you'll get at least a verbal discussion.

The refinancing boom caused by today's lower interest rates has resulted in many lenders offering "no-fee" loans. These loans require you to pay no origination fees, no closing costs and no points. You just sign on the dotted line. But the offers come at a price. You'll have to pay rates a half-percentage point or more than the going rate. Again, look at the annual percentage yield to determine what you're really going to pay.