By making extra payments you reduce the total amount of interest you pay and reduce your principal balance faster. Simply estimate what your closing costs will be to refinance, and divide the costs by your projected monthly savings. If your payback time is under three years, it's a good time to refinance. This will cover attorney's fees, title insurance, interest in advance, tax escrows and other common items. It's also a good idea to have at least two months housing payments as reserves once you close.
Lenders offer special no closing cost loans.
The interest rates are a little higher, but they're often perfect for people with plenty of income but low savings. Three months of bank statements for each bank or investment account. Several recent pay stubs. A copy of the deposit check given to the Realtor. Documentation is slightly different if you're self-employed.