skierincolorado wrote: ↑Mon Sep 14, 2020 11:29 pm
dudefella wrote: ↑Mon Sep 14, 2020 9:39 pm
Loan: 315k

Current rate: 3.125%

Loan A: 2.25%

A+B+C: $1900

Lender credit:$1200

Loan B: 2.375%

A+B+C: $1900

Lender credit:$2400

Taking the lower date would reduce mortgage by $20ish a month. Recouping the $1200 would take about 5 years so my assumption is go 2.375% and get the $2400 instead so everything is covered?

You're nor factoring the change in interest. Yes your payment is only $20 less, but more of it goes to principal. What you should care about is the reduction in interest, which is $39.38/month for 1/8 of a % on a 315k loan. At close to $40/month in savings, you will break even in 2.5 years.

It's still a toss up IMO but I'd be leaning towards the lower rate when the breakeven is less than 3 years.

Use this calculator but be sure to set the tax rate to 0% unless you itemize:

https://www.bankrate.com/calculators/mo ... lator.aspx

What an awesome refi thread! I'm still confused though

. We're those people that nearly double our monthly mortgage payment with the goal of paying the house off ASAP. We understand the opportunity cost, but the satisfaction of not having a mortgage is so enticing (we also save a significant portion of our income, so we're not cash poor). Anyway, we are comparing refinance opportunities and I'm still not entirely clear on how to calculate the closing cost break-even date. I thought I understood, then I read this article (

https://www.lendingtree.com/home/mortga ... refinance/) that seems to indicate the calculation is:

**TOTAL CLOSING COST/(MONTHLY PAYMENT SAVINGS + AVERAGE MONTHLY INTEREST SAVINGS).** With that logic, it seems the average monthly increase in equity as a result of the lower refinance rate should also be included in the denominator.

>

I feel like the above formula is double dipping on savings somehow. Or maybe I'm completely misunderstanding. Anyway, here's our situation:

Original loan: $139,650

Current balance: $88,000

Current rate: 4.625%

Current term: 30 years

Refi rate: 2.5%

Refi term: 15 years

Refi cash out: $0

Refi closing costs:

**$3,042**
Monthly payment: $1740 (includes minimum + extra; will not change regardless of refi decision)

If we don't refinance, we're going to put the closing costs toward our current principal. Therefore, my amortization spreadsheet indicates:

Reduction in minimum monthly payment:

**$131.23**
Average monthly interest savings until payoff date (assuming an October start date):

**$81.64**
Other benefits of this refi are minimal, but positive, including knocking a couple months off the payoff date and a net savings after closing costs of about $1000 through the payoff date. But most importantly, in the event of a job loss (possible) that necessitates moving to the minimum payment, our interest savings over the full life of the loan would be in the $17,000 range.

**I'm ball parking a bit, but assuming all of this is close, how many months will it be until we break even on the closing costs? **

A) $3,042/$131.23 = 23 months

B) $3,042/$81.64 = 37 months

C) $3,042/($131.23+81.64) = 14 months

D) No idea because your math is so bad
Thanks for your insight! Hopefully someone smart can help me wrap my head around this.