Final answer:
Refinancing your loan is beneficial when the return on refinancing costs exceeds the rate on a new loan, especially if interest rates have dropped since the original loan was taken or if the borrower has a strong financial record.
Step-by-step explanation:
It can be worthwhile to refinance your loan when the return on the refinancing cost is greater than the rate on your new loan. This usually happens when interest rates in the economy have fallen since you got your original loan, which makes refinancing attractive because the new loan can have a lower interest rate
Additionally, if the borrower is a firm with a record of high profits, the lender will find the loan more attractive because there is a greater likelihood of the loan being repaid, potentially leading to favorable refinancing terms.