Can you recover your costs?
If you are looking to lower your monthly payment with a refinance, it’s important to know if you can recoup the refinancing costs. When you refinance your mortgage, you will end up paying similar costs to the ones you paid when you bought the home – for example: appraisal, credit report, closing fee, underwriting and processing fees. Consider if it’s worth paying these costs to reduce the amount of your monthly payment. A good method is to divide the total cost to refinance by the amount of money you are saving each month in your payment – this is how long it takes to recover your costs. For example, if you are paying $2,000 to refinance and saving $100 per month, it will take you 20 months to recover. Make sure you plan on living in the home at least that long or you will be wasting your money.