(MONEY Magazine) – WITH THE INTEREST RATES ON FIXED-RATE mortgages near their lowest levels in 20 years, homeowners everywhere are thinking about refinancing--and right ly so. Whether your existing loan is an adjustable-rate mortgage (ARM) or a fixed-rate version, you may be able to save thousands of dollars by trading it in for a new one at today's average fixed rate of 8.06%. Here's the lowdown:

If you've got a fixed-rate loan: Patty McGill, president of the National Association of Mortgage Brokers and owner of her own mortgage brokerage, Money Marketing, says fixed-rate mortgage holders who satisfy what she calls the "two and two rule" are good candidates for refinancing. In other words, the rate on your new loan must be at least two points lower than the rate on your existing mortgage, and you must plan to stay in the house for at least two more years. (Move sooner, and your interest savings aren't likely to offset the closing costs you'll incur--typically $1,000, plus points--in refinancing.) If a homeowner with, say, a $100,000 30-year mortgage at 10% obtained one of the nation's best deals, such as the 30-year 7.38% fixed-rate mortgage (three points) offered by First Fidelity Bank in Alexandria, Va. (703-658-8117), he'd save $187 a month and break even in about 21 months.

If you've got an ARM: Borrowers must usually pay a premium for the peace of mind of a fixed-rate mortgage. But thanks to today's lower-than-normal rates, many ARM holders have an opportunity to lock in a rate that's actually lower than their current rate.

For example, a homeowner who took out a $100,000 one-year ARM in 1993 at the then national average of 4.25% will be paying 8.25% this year, says Keith Gumbinger, an analyst at HSH Associates. (The typical ARM can increase as much as two points annually--with an overall cap of six points--when national rates are rising.) By obtaining a 7.38% 30-year fixed-rate mortgage today, the homeowner would save $61 a month--and that's even before a likely ARM rate increase to 10.25% next year.

Like holders of fixed-rate mortgages, however, the amount of time you intend to stay in your house is a factor, says McGill. If you plan to move sooner rather than later--say, within four years--staying with your ARM could be the way to go, she says, because it could take you that long to break even on your closing costs.

Finally, for those of you who are waiting for rates to tumble even lower, Gumbinger offers this advice: "It's a fool's game to try and time the bottom of the market."

--Duff McDonald