Question by : How long will it take to cover the cost of refinancing?
If someone was refinancing their mortgage and reducing the mortgage payments by $ 65 a month and the closing costs of refinancing will be $ 1,670, how long will it take to cover the cost of refinancing?
Best answer:
Answer by Ariaread
26 months 2 yrs, 2 months
1670 divided by 75
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A guess is about 3 to 5 years.
Google: Should I re-finance my mortgage calculator
http://www.bankrate.com/calculators/mortgages/refinance-calculator.aspx
Then google average closing costs followed by your state name.
A little under 26 months.
ASSUMING the term of the long stays the same, $ 1,670 / $ 65 = 25.69 months, or just over 2 years.
What you DIDN’T say is that MOST refinances change the length of the loan, making the change in the monthly payment different than the actual savings. A more accurate measure is calculating the difference in interest rates and comparing that to the refinancing costs.
You can’t look at the lowering fo the payments to see how long it will take.
You need to look at the interest rate. If you owe $ 100,000 and you lower your interest rate by 1%, you are saving $ 1,000 each year in interest (not exactly, but that’s a ballpark figure). So, if your closing costs were $ 1,670, it would take about a year and a half to recoup your closing costs.
The reason you can’t simply look at how much your payments go down is because your payments being lowered could be a result of a longer term, or some other different terms in the mortgage.