The two questions a refinance must answer
1. Do you stay past break-even? Closing costs are paid up front; savings arrive monthly. Divide costs by monthly savings to get the break-even month. Sell or refinance again before then, and the refi lost you money regardless of the rate.
2. Does it cost less over the whole loan? A new 30-year term resets the clock. A lower payment can still mean more total interest because you pay for longer. This calculator shows both numbers so a "cheaper" monthly payment can't hide an expensive loan. Total remaining cost for the refinance includes your closing costs.
Rules of thumb, and their limits
The old "refinance if you can drop the rate 1%" rule ignores loan size and how long you'll stay. On a large balance, 0.5% can be worth it; on a small one, even 1.5% may not cover the costs. Run your actual numbers instead. If you want to avoid resetting the clock, ask for a new term matching your remaining years — many lenders offer any term, and this tool lets you compare them.
No-closing-cost refinances
Lenders can waive upfront costs in exchange for a higher rate. Model it by setting costs to zero and entering the higher rate — often it wins if you'll move within a few years, and loses if you'll stay long.