Doing the calculations
Here's an example. Let's say Sue has a $300,000 loan repayable over 25 years. Her current rate is 6.4% and her monthly repayments are $2,006.
If Sue can refinance to a loan with a rate of 5.9% a rate reduction of 0.50%, she can lower her repayments to $1,914 a saving of $92 each month.
Looking at the cost side of things, we'll assume Sue will pay $1,000 to refinance her loan. In this case it would take about 11 months ($1,000 divided by $92) for Sue to claw back the costs through the savings she makes. That's not a bad time frame. If it was to take several years to recover her costs, refinancing may not be worthwhile.