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Add the quoted costs into your balance (the new financed amount) estimate the new payment VS. the old payment.
The difference HAS to pay for all fees in a reasonable amount of time - like if you plan on selling the home in 3 years, the monthly savings has to pay for the total cost of the refi before you leave in order to make sense.
For example, if the monthly savings by dropping the rate is $100.00 and it costs you $5K to refi, it would take 50 Mos. to pay off the fees - if you plan on staying there it tachnically makes sense.
You can also subtract from the closing cost total the fact you will skip a payment one month when you do this - if the payment skipped is $1500 subtract that from your closing costs then check how fast the monthly savings pays for itself - $5K costs (-) $1500 old payment ( / ) $100 monthly savings =35 mos. to recoup fees.
Obviously this method shows that a smaller loan has to have a bigger rate discount than a larger one to make sense. This method you also use to show benefit byconsolidating credit cards.
Whatever you do, don't follow the "gotta drop your interest rate 2% to benefit" - that was around when a house cost $15K, if it's a $500K balance obviously you'll save even if it's a .25% rate discount.
Good luck.
rjp
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