A common rule of thumb is to refinance when you can reduce your interest rate by at least 1%. This typically results in significant savings both monthly and over the life of the loan. For example, lowering your mortgage rate by 1% on a $200,000 loan can save you around $125 per month or $1,500 annually before taxes​ (The Balance) (Mój idealny kredyt hipoteczny).

However, refinancing can still be beneficial with a rate reduction of less than 1%, especially in certain circumstances. Refinancing with a 0.5% reduction might be worthwhile if you have a large loan balance, are switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or are consolidating high-interest debts​ (Raporty dotyczące kredytów hipotecznych) (Mój idealny kredyt hipoteczny).

The breakeven point, which is how long it takes for the savings from the lower interest rate to cover the refinancing costs, is also crucial. Typically, closing costs range from 2% to 5% of the loan amount. For a $250,000 mortgage, closing costs might be around $4,500, and you would need to stay in your home long enough to recoup these costs through monthly savings​ (hsh.com).

Ultimately, while the 1% rule is a helpful starting point, individual circumstances such as loan size, current interest rate, closing costs, and how long you plan to stay in the home should be considered when deciding whether to refinance. Using online mortgage calculators can help determine the potential savings and breakeven period for your specific situation​ (The Balance) (hsh.com).