When do the costs of a refi exceed the benefits?

Refinance home neighborhood

This is the question when considering a mortgage refinance and one that drives us Mortgage-Analyzer. 

Maybe you are seeing the eye-poppingly low rates advertised or that you heard your friend bragging about. So, you ask a lender (salesperson) if you should refi and what do they say? Of course, let’s get you pre-qualified – why not??

Here are some of the questions that the experts at Mortgage-Analyzer recommend recommend asking before anyone attempts to refinance: How long will it take you to make up the lender fees, appraisal and other closing costs with the new monthly  savings (hopefully)?

Will you live in the house long enough to realize the savings and break-even on the costs and if there is a chance you have to relocate soon, how will this affect your break-even? Hint: renting it out could be a good way to have your cake and eat it too.

If you have mortgage insurance (PMI or MI), do you have enough home equity to reduce or eliminate the mortgage insurance and does this speed up the time to breakeven? You should not refinance if you are already close enough to the insurance being eliminated by virtue of time or enough home home equity. Will your home appraise (you will be out $300-800 if not) high enough to justify the refinance?

Will the refinance costs be included in the mortgage or out of pocket? What is the opportunity cost of your money if you have to come out of pocket? 

These are some of the questions that will help you decide whether you should refinance or wait it out. Our Mortgage-Analyzer tool can help you get answers to these vital questions.

When do the costs of a refi exceed the benefits?
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