Mortgage Refinancing – How to Calculate Your Break Even Point of Savings When Refinancing

By Louie Latour

The decision to refinance your mortgage is often motivated by saving money. In order to determine if mortgage refinancing is right for you, calculate where you begin to realize the savings from your new mortgage. Here is how to calculate the break even point where your savings start when mortgage refinancing.

The big question everyone asks when mortgage refinancing comes down to “How long before I start saving money?” Calculating your break even point is a fairly simple calculation. To get started determine the amount you will be saving with a lower monthly payment. Add up the costs associated with refinancing your mortgage and divide by the amount you save each month. This will tell you the number of months it will take to reach your break even point.

Here is a simple example. Suppose your refinance your mortgage and lower your monthly payment from $1,200 to $1,000. Your origination fees, closing costs, and points add up to $4,500. Divide $4,500 by $200 and you’ll find that your break even point is after 23 months. There are other factors that influence your break even point including taxes and whether or not you pay your closing costs or finance them with your loan. If you elect to finance your closing costs with your loan principle, you may never reach the break even point as the average homeowner refinances their mortgage every seven years.

You can learn more about mortgage refinancing, including strategies to save money by avoiding costly mistakes by registering for a free mortgage tutorial.

To get your FREE six-part Mortgage Refinancing Video Tutorial, visit RefiAdvisor.com using the link below. Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. For a free copy of "Mortgage Refinancing - What You Need to Know," which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com. Claim your free mortgage refinance information guide today at: http://www.refiadvisor.com Mortgage Refinancing Information Article Source: http://EzineArticles.com/?expert=Louie_Latour