Consider Tony Nelson, 49, a real estate broker and his wife Merrilyn, 56, a psychotherapist. Recently, the couple took out a 15-year fixed rate loan at 6.75% to replace an 8.13% ARM with a 30-year term. Their monthly payment jumped by $200, but now they will own their own home outright by the time they retire. Smart! Also the total interest on the 15-year loan will come to $95,447, vs. $222,234 on the remaining life of the ARM -- and that assumes their adjustable rate would have held steady at its current 8.13%. "This is forced savings," says Tony. "When I retire, we can scale down and take equity out of the house as we want to."

If you can't afford the payments on a 15-year mortgage or home equity loan, your next best means of building equity is to refinance for less than 30 years. To do so, ask your mortgage lender to customize your new loan's term to match the years that are left on your previous loan. Also try to anylze your savings. Check closely to determine the available mortgage rates and the costs associated with refinancing. These mortgage costs can include items such as an appraisal and other fees. Then determine what your new mortgage payment would be if you refinanced.

Estimate how long it will take to recover the costs of refinancing by dividing your closing costs by the difference between your new and old mortgage payments. However, the amount you may save depends on other factors as well. Including your total refinancing costs, whether you sell your home in the near future, and the effects of refinancing on your taxes. The old rule of thumb used to be that you shouldn't refinance unless the new interest rate is at least two percentage points lower. However, many Mortgage lending companies are now offering zero point loans and low cost refinancing. Therefore, even if your rate change is less than one percentage point, you may be able to save some money by refinancing. As always check with all mortgage lenders to see what will be the best refinancing for you.