To Refinance. Is That A Question?


I didn’t know there’d be math.

Should you refinance? Now that interest rates are being slashed to record lows, should you consider refinancing your mortgage?

This is something no expert should tell you definitively. You have to figure it out for yourself and to do so, we give you this simple equation. Ask your lender what the closing costs will be for a possible new loan. Now take the difference between your current mortgage payments and your potential new mortgage payments. Divide the closing costs by the savings per month. This will give you a number of months. If you plan to stay in this house for at least that number of months, do the refinance! If not, don’t do it! It will cost you more to secure this new loan than you will save. Wait it out.

Let’s Break It Down

Here is an example. Let’s say your closings costs on a refinance will be $5,000 and it will lower your mortgage from $2,500 per month to $2,250 per month. This is a savings of $250 per month. Divide $5,000 by $250 and you get 20 months, or a little less than 2 years. That is how long it will take you to recover those closing costs in savings. If you are going to stay in the house for more than 20 months, do the refinance. If not, don’t do it! Unless you feel like wasting $5,000. In which case, why do you read a newsletter like this?

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