A rate-and-term refinance lowers your interest rate or changes the term (e.g., from 30 to 15 years). A cash-out refinance gives you a check at closing drawn from your equity.

Refinancing involves closing costs (typically 2-5% of the loan amount). You break even when monthly savings × months ≥ closing costs — typically 2-4 years.

A common rule of thumb: refinance is worth it when you can drop your rate by 0.5-1% AND plan to stay in the home long enough to recoup closing costs.