Break-even is usually a dip on a time-plot due to the initial cost (origination fee, doc fee, lawyer fee, etc.), followed by an upward slope that is the cost differential of the new payment vs the old payment; when that upward sloping line crosses zero that's the break-even point. In the ficticious example below, if the total cost was -$500 and the new payment was $100 less than the old payment, the break-even is at year-5 and at year-10 you've saved +$500. If there's absolutely ZERO cost, then there's no need to calculate a break-even as you're ahead the moment you start making lower-cost payments as long as the mortgage term is less than or equal to the remaining term on your current mortgage (not the original term length).Bonesly… how does one calculate “when you break even” in evaluating re-finance options?
Your $3K threshold for savings on a refinance seems reasonable. How did you decide on that figure?
The "significant to me" threshold of $3K is just a personal choice. If I save $300 over 10 years, that's probably not worth the hassle to me, but saving $3K over 10 years is noticeable to me. That threshold is unique to the individual.
Statistics: Posted by bonesly — Thu Sep 05, 2024 11:59 pm