World climate has ice ages, and baseball had a Dead Ball Era. Mortgages have their defining epochs, too.

In 2003, when mortgage rates dropped below 5.5 percent for a time, it was the Year of the Refinance. The years 2004 through 2006 constituted the Era of the Exotic Mortgage, when homebuyers were eager to get any type of loan so they could grab houses before prices were out of reach. Then came 2007, the Year of Reckoning, when home prices went down and the foreclosure rate went up.

And 2008 will be the Year of the Refinance again, but for different reasons than those that drove the refi boom of 2003. Five years ago, low rates spurred people to refinance. In 2008, homeowners will refi because their adjustable-rate mortgages will hit their reset dates, sending rates skyward.

Know when your ARM resets
It's bad form to get caught by surprise when your adjustable-rate mortgage, or ARM, resets. Here's how to not let it happen to you.

First, you have to know what "reset" means. By definition, the rate on an adjustable-rate mortgage goes through at least one adjustment. Those adjustments are called resets. In recent years, the most common kinds of adjustables have been 3/1 and 5/1 ARMs.

With a 3/1 ARM, the initial, introductory rate lasts three years. Then, on the 37th month, the loan is reset for the first time and the rate is adjusted upward. Typically the rate is reset every 12 months after that. With a 5/1 ARM, the introductory rate lasts for five years and the first reset is at the 61st month.

To check on the reset date, pull out your copy of the loan contract from your well-organized home filing system. On the first two or three pages, there should be a section that details when the rate changes and how the new rate is determined. Look for a little headline that says something like, "Change dates."

See Bankrate's annotated contracts for an example. The first reset date, and the timetable for subsequent resets, should be in that section.

Find out what your ARM's rate would be if it were reset this month
Just so you'll have an inkling of what you'll be facing, find out what would happen if the rate were to reset now. This step isn't necessary if the reset is a long way off. But if the rate is going to change in 2008, this is something to keep an eye on.

Go back to that loan contract. In the section that discloses the rate's change date, there should be an explanation of how the lender will calculate the new rate. The ARM's rate will be based on an index and a margin. The index is an independent interest rate that is widely known -- the yield on the one-year Treasury note, for example, or the six-month London Interbank Offered Rate, or LIBOR.

The margin is a percentage that's added to the index. Let's say that your index is the one-year LIBOR, and that today it's exactly 5 percent. (It's not; we're just being hypothetical here.) And let's say your margin is 2.25 percent. If your ARM were to reset today, the new rate would be those numbers added together, or 7.25 percent.

The margin will be stated right there in the loan paperwork, although it might not use the word "margin" to describe it. As for the index, you can find many indexes in Bankrate's Rate Watch page or in the business section of a newspaper.

Once you know the new rate and the amount you owe, figure your monthly principal and interest with Bankrate's mortgage calculator.

Know if you should refinance sooner rather than later
To refinance, your house has to be worth more than the amount of the refinanced loan. Your equity is the difference between the house's market value and the amount you owe. If the house is worth $200,000 today and you owe $180,000, that $20,000 difference is the equity. With a $200,000 house, that would be 10 percent equity.

The more equity you have, the easier it's going to be to refinance. If you have less than 5 percent equity, it might be difficult to qualify for a refinanced mortgage. Difficult, but not impossible -- if you have a decent credit score. Preferably, you will have 10 percent equity; ideally, you'll have 20 percent or more.

If your home has been losing value in this down market, you probably are aware of it from reading the newspapers, gossiping with neighbors and occasionally checking Zillow.com. In cases where the percentage of equity is in the single digits while home prices are falling, it might be a good idea to refinance months before the reset date. Wait too long and you might not be able to refi because you owe more than the house is worth.

The best moves to make in 2008