Refinancing is a tool, not a guaranteed savings machine. The idea “refinancing a loan always saves you money” is false because you must compare the **all-in** costs of the new loan versus the old one. That includes interest-rate differential, closing or origination fees, any prepayment penalties on the existing loan, and the effect of changing the loan term (longer terms can lower monthly payments but increase total interest paid). For mortgages, refinancing to a lower rate often makes sense when the rate drop is large enough to offset closing costs and you plan to stay in the home long enough to recoup those costs; for small rate differences or short expected ownership periods, refinancing may cost more.

Evaluate refinancing by calculating the break-even period: divide total refinancing costs by the monthly savings to see how many months until you recoup costs. If you’ll remain in the loan beyond that break-even window, refinancing is likelier to be beneficial. Also consider secondary effects like resetting the amortization schedule (which front-loads interest early in the term) and tax consequences (mortgage interest deductibility varies by jurisdiction). For non-mortgage loans (student, auto), check whether the new loan reduces the APR significantly and whether any fees or changes to protections (cosigner release, borrower benefits) make the switch less attractive. The bottom line: refinancing **can** save money but does not always; a careful cost-benefit calculation is required.