Manage your mortgage, save thousands

NEW YORK (MONEY Magazine) -- By now, rebalancing your retirement savings should be second nature (it is, right?). But it's not just the asset side of your personal balance sheet that needs tending to.

Your debt, specifically your mortgage, deserves thought from time to time.

Size alone commands attention: The average homeowner owes $115,200, a small fortune. The no-brainer move - refinancing a mortgage for a lower interest rate - is off the table for many because rates are well off their lows. But other moves, from keeping fees down to tapping your loan for other goals, can be wise anytime.

These three make sense today.

Home-equity lines of credit were the crack cocaine of the home-improvement binge of the past few years, and it's easy to see why.

Three years ago, the minimum monthly payment on a $100,000 line of credit was just $333. But now that the prime interest rate (which is the rate most HELOCs are pegged to) has doubled to 8 percent, the minimum is $666.

If you can't pay off the HELOC, you may be able to convert it to a conventional loan.

Another solution is to refinance it and your mortgage into a single fixed-rate loan - if, that is, you can find a rate that beats what you are paying for both loans and saves you enough to cover refi costs.

You'll need to calculate your blended interest rate: Divide your mortgage balance by total debt (mortgage balance plus HELOC balance) and multiply that by your mortgage rate. Then divide your HELOC balance by total debt and multiply by your HELOC rate. The sum of those two results is your blended rate.

Let's say you have a 6.5% mortgage with a $200,000 balance and a 10.5% HELOC with a $100,000 balance. Your blended rate is 7.8% - a rate you can still beat today.

Lately, with home prices rising so fast, it's been tough for buyers to cobble together a decent down payment.

If you put down less than 20%, you may be paying private mortgage insurance (PMI). The extra cost - $16 to $50 a month for every $100,000 of debt - may seem so inconsequential that you forget you're paying it, but it adds up over time.

If you took your mortgage out after July 1998, your lender must automatically cancel your PMI once you've paid off 22% of the loan. But as long as you've paid the loan on time for two years, you can ask that PMI be discontinued when your equity reaches 20%.

Here's where rising prices become your friend: You may hit the 20% mark sooner than you expected if prices in your area have risen significantly - all that gain belongs to you, not the lender.

You'll have to spend about $350 for an appraisal to prove that your gains and principal payments add up to 20%. But just a few months of PMI savings could cover that cost.

There's nothing like paying off your mortgage for a feeling of freedom. But that doesn't mean it's a good financial move.

Prepaying your mortgage (or any debt) is economically the same as earning a return equal to the interest rate on the loan. However, recent low mortgage rates - you could be paying less than 6% on a 30-year loan - don't outstrip what stocks have returned historically.

A better move now for older workers with poorly funded retirements and a lot of home equity may be to take on more debt, says Keith Gumbinger of HSH Associates. "If you're planning on selling that four-bedroom behemoth when you retire, you could take money out of your home with a cash-out refi and invest it," he says.

Not a bad solution if you've enjoyed big gains in your home's value and can put that money to work effectively.