When Does Refinancing Pay Off?
Refinancing replaces your current loan with a new one, and the new loan has closing costs. The savings only start once the lower payments have covered those costs.
Find Your Break-Even Month
Divide the total closing costs by the amount your monthly payment falls. If a refinance costs $4,500 and saves you $250 a month, you break even in month 18.
Questions to Ask First
- How long do you expect to keep the home?
- Does the new loan restart a 30-year term, and do you want it to?
- Would a shorter term save more than a lower rate?
Your loan officer can run the numbers on your current loan and show the break-even month for each option before you commit.
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Licensed loan officers and advisors at ClearPath Mortgage, writing plainly about rates, loan programs and what to expect on the way to closing.
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