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What is the best way to determine if you should refinance a mortgage?
Yes, take the new rate, but instead of using the new 30 year term, calculate the payment as though the new mortgage were at the remaining term. 3 years into a 30? You calculate the payment as if the new mortgage were 27 years.  This will tell you what you are really saving. Now, take that savings and divide into your closing costs if any. That will give you the break even. Will you be in the house that long?  If you can find a no closing cost deal, it's worth it for even 1/8% savings.