How do I know if refinancing my loan makes sense?

Refinancing makes sense when you can secure a lower interest rate than your current loan, ideally at least 0.5% to 1% lower, which reduces your monthly payment and total interest paid. Calculate your break-even point by dividing the closing costs by your monthly savings. For example, if refinancing costs $3,000 and saves you $150 per month, you break even in 20 months. If you plan to stay in your home or keep the loan longer than that, refinancing is likely worth it. Also consider your remaining loan term, credit score, and current equity. Extending your term to lower payments can cost more in total interest over time, so weigh short-term savings against long-term costs before deciding.