Refinancing has closing costs — typically 2-5% of the loan amount, or $6,000-$15,000 on a $300,000 mortgage. To know if it makes sense, divide your closing costs by your monthly savings. If refinancing saves you $200 per month and costs $8,000, your break-even point is 40 months. If you plan to stay in your home longer than that, refinancing pays off.
You can lower your rate by at least 0.5%. You plan to stay in the home for at least 3-5 more years. Your credit score has improved since your original mortgage. Your home has gained equity, potentially eliminating PMI. Or you want to switch from an adjustable rate to a fixed rate for stability.
You are close to paying off your mortgage — refinancing restarts the amortization clock. You plan to move within 2 years — you will not hit break-even. Your credit score has dropped significantly — you might not get a better rate. Or your current loan has a prepayment penalty that offsets the savings.