Refinancing and making extra payments can both reduce interest, but they work in different ways. Refinancing replaces your current loan with a new one. Extra payments keep the loan you have and push more money toward principal.
Refinancing needs a break-even check
A lower rate sounds great, but closing costs matter. If it takes three years to break even and you may move in two, the pretty rate might not help much.
Extra payments are simpler
Extra principal payments do not require a new loan, a credit check, or closing costs. They can be a flexible way to chip away at interest while keeping your current mortgage terms.
Watch the loan term
Refinancing into a new 30-year loan can lower the payment but stretch the debt back out. That may help cash flow, but it can also increase the total years you are paying.
The best answer may be emotional too
Some people want the lowest required payment. Others want the mortgage gone faster. Both goals are valid; they just lead to different choices.
If refinancing saves $150 a month but costs $4,500 upfront, the simple break-even point is around 30 months. If you will not stay that long, think twice.
Good places to double-check
Compare your current loan, the new loan estimate, closing costs, break-even timing, and how long you expect to keep the home.