Both can lower your total interest, but they work differently. Refinancing replaces your loan with a new one. Extra payments keep your current loan and pay it down faster.

Refinancing: look at the break-even point

A refinance usually comes with closing costs, often a few percent of the loan. To find your break-even point, divide those costs by how much your monthly payment drops. If the answer is longer than you expect to stay in the home or keep the loan, refinancing may not pay off.

Watch the term

If you refinance into a new 30-year loan after paying for several years, you restart the clock. Your payment may fall, but you could pay interest for longer. A shorter new term avoids this but raises the payment.

Extra payments: flexible and free

Extra payments have no closing costs and you can stop any time. They help most when your rate is already reasonable. If today’s rates are well below yours, refinancing may save more. You can also do both: refinance, then keep paying your old payment amount.

Run the numbers with the mortgage calculator, and compare with a lender’s quote. This is general information, not financial advice.

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