"Under the modeled scenario, a drop of 0.25 percentage points left borrowers $2,424 underwater after three years. A drop of 0.5 points resulted in break-even status after 3.08 years. A decline of 75 basis points allowed borrowers to break even in just under three years, while a drop of 100 basis points delivered break-even status in 20 months and $4,764 in net savings."
"Many assume that any drop in rates is enough to justify refinancing, but the math tells a different story, said Jake Vehige, president of mortgage lending at Neighbors Bank. Unless you're seeing a significant drop, refinancing may not make sense right away. The break-even point isn't just about the rate. It's about how long you plan to stay in your home, how much you pay upfront and where you live."
"The report noted that borrowers in high-cost housing markets such as California, Washington, D.C., and Hawaii reap the greatest five-year savings because their typically larger loan sizes magnify the impact of lower rates. Borrowers in New Hampshire with average loan amounts of $430,247 see nearly $3,000 more in five-year savings through a 0.5-point drop than those in Louisiana, where the average loan size is $252,075."
A 0.25 percentage-point rate drop leaves borrowers $2,424 underwater after three years, while a 0.5-point drop reaches break-even at about 3.08 years. A 75-basis-point decline yields break-even just under three years; a 100-basis-point drop produces break-even in 20 months and $4,764 in net savings. Break-even timing depends on length of residence, upfront costs, and location. High-cost housing markets deliver the largest five-year savings because larger loan sizes amplify rate reductions. Fifteen-year mortgage holders break even faster than 30-year holders, and conventional loans typically save sooner than FHA, VA, or USDA loans. Every state reaches break-even within five years.
Read at www.housingwire.com
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