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Refinancing for 0.5% or less with an ARM or high loan balance. Many experts often say refinancing isn't worth it unless you drop your interest rate by at least 0.50% to 1%. ... A large loan size may result in significant monthly savings for a borrower, even when rates dip by only 0.25 percent, says Reischer.

The top reasons to refinance are: Get a lower interest rate: Lowering your mortgage rate can reduce your monthly payment if the repayment term (duration) remains the same. However, keep in mind that a refinance can carry fees ranging from 2% to 5% of the loan balance due.

A general rule of thumb is to refinance when interest rates drop 2 percentage points or more. For example, if you have a $100,000, 30-year, fixed-rate mortgage at 10 percent, you will pay more than $215,000 in interest over the next 30 years.

Refinancing for 0.5% or less with an ARM or high loan balance. Many experts often say refinancing isn't worth it unless you drop your interest rate by at least 0.50% to 1%. ... A large loan size may result in significant monthly savings for a borrower, even when rates dip by only 0.25 percent, says Reischer.

Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%. However, many lenders say 1% savings is enough of an incentive to refinance.

Figure out how long it may take for your refinance to pay for itself. To do this, divide your mortgage closing costs by the monthly savings your new mortgage will get you. If you're paying $5,000 in closing costs but you'll save $200 per month as a result of refinancing, it will take you 25 months to break even.

The traditional rule of thumb is that it makes financial sense to refinance if the new rate is 2 percent or more below your existing interest rate. The new rate on a refinance must provide enough savings in monthly mortgage payment to justify the cost of refinancing.

The . 25 percent difference adds an extra $26 a month. Although that may not seem like a significant amount of money, it adds up to over $4,000 over the life of your loan.