The rule of thumb
Refinancing makes sense when you'll stay in the home past the break-even point — the month where cumulative savings exceed closing costs. A common guideline: refinance when rates drop ~0.75–1% and you'll stay 5+ years. But run your own numbers — a "small" 0.5% drop on a large balance can still save tens of thousands.
Watch out for
- Resetting the term: refinancing into a new 30-year loan lowers payments but restarts the clock — compare total interest, not just monthly payment.
- Cash-out refis: different math; this calculator assumes rate-and-term.