"Refinancing a mortgage is when you get a new mortgage in order to pay off your existing mortgage. Your refinance pays off your existing mortgage completely, and then you are left with new loan terms and a different monthly mortgage payment. Of course, there could be other costs involved like closing costs, origination fees, title insurance fees, credit report fees, and appraisal fees. All of this information is essential to know so you can calculate the break-even point."
"The break-even point is the amount of money that your savings from the new lower interest rate exceeds the closing costs. In order to calculate this number, you need to divide the closing costs by the monthly savings. Some statistics showed that homeowners move or refinance every 6.25 years; however, this isn't a rule. The median tenure in a home nationally has hovered around 10-13 years in recent years (varies by market)."
Refinancing replaces an existing mortgage with a new mortgage, producing new loan terms and a different monthly payment. Closing costs can include origination fees, title insurance, credit report fees, and appraisal fees that reduce immediate savings. The break-even point equals total closing costs divided by monthly savings and indicates how long until refinancing delivers net benefit. Homeowner behavior varies: some move or refinance roughly every 6.25 years, median home tenure is about 10–13 years, and prior loans are often 3–5 years old at refinance. A sooner break-even point increases the likelihood that refinancing is worthwhile.
Read at 24/7 Wall St.
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