Break even point and Refi Question

To calculate if its "worth it" do you figure out your break even point with the money you save every month on your monthly payment (to pay off the cost of the refi, closing costs). Or do you/ can you use the money you save every month with the additional principle you are paying twds your loan balance (bc its a lower interest rate and /or refi'ing from an Interest Only loan to an Interest and Principle loan. _


TIA

Re: Break even point and Refi Question

To calculate the break even point it is X dollars to refinance, spread that payment out over Y number of months until your old mortgage amount equals the new mortgage amount. So lets say you have 2000 in closing costs, and your payment went down by 200 per month. Your break even point of the 2000 would be 10 months or 200 divided by 2000.

Message edited 4/26/2012 12:10:15 AM.

Re: Break even point and Refi Question

Re: Break even point and Refi Question

It's always better to pay down the principle, but I thought that the way you can calculate the savings is how I outlined it above. You will be saving money because of the principle payments.