Whether refinancing your home loan is a good or bad idea depends on your circumstances.

Simply comparing your loan’s current rate with what’s available from banks and mortgage companies isn’t good enough to tell you whether you should refinance.

That’s because you’ll have to pay closing costs all over again, just like when you bought the house to begin with.

Today, closing costs on a $200,000 home loan typically run about $3,000, and that doesn’t include taxes and insurance or prepaid items, such as prorated interest or homeowner association dues.

So, when refinancing, you have calculate how soon the cost of refinancing – that is, the closing costs – will be offset by the reduced monthly house payment. Call this the “breakeven” point.

With so many variables involved in deciding whether to refinance, it’s smart to use a refinance calculator, where you can put in all the values and let the calculator tell you whether refinancing makes sense.

Then you have to ask yourself if you will still be living in that house by the time you reach the break even point.

With Americans moving, on average, every five years, that’s an important question to answer. If you think you’ll be selling your house before the breakeven point, then refinancing doesn’t make sense financially.

If you don’t ever plan to sell your house, remember that if you refinance a fixed-rate loan, you set the reset the clock on when you’ll own your home free and clear – something to consider when thinking about retirement.