Interest rates move in cycles, so the best time to refinance is when rates drop.
Typically, rates should fall a point or more before you do it. Refinancing entails closing costs and other fees, so it's important to know whether lower monthly payments will offset that cost. Another factor to consider is how long it will take you to break even. If you plan to sell your home in a year, refinancing is not the smart thing to do. When they refinance at a lower rate, some homeowners take the cash from the equity they've acquired to pay for a big expense such as a remodeling project or their kids' college tuition.