When to refinance....that is the question of the day.
 
Much has been written about this subject and my opinions relate to Palm Beach County properties as closing costs can vary greatly from state to state.  Based on a loan amount of $250,000 (for illustrative purposes), closing costs would approximate $3,800 as closing costs on a refinance are very similar to a purchase.  A simple test would be to divide your monthly interest savings into $3,800 to determine how many months it will take to recoup the $3,800.  I would suggest 24-36 months or less would be a realistic target for you to consider. Cash flow (lowering your monthly outflow) may be another consideration.  The closing costs may be paid at closing or added back into your new loan!

 

Another factor is the differential between the rate on the current mortgage and the prevailing rate for a new mortgage.  The range is 1% to 2.5%....The reason for the big range depends on the loan size as many closing costs are the same regardless of the loan amount.  If a $50,000 loan has closing costs of $2,604 a 1% rate difference is $41.67 monthly (using interest only), therefore it would take 62.49 months to recapture the closing costs.  If a $400,000 loan has closing costs of $4,529 a 1% rate difference is $333.33 monthly (using interest only), therefore it would take 13.58 months to recapture the closing costs.  The bottom line is that smaller loan amounts require a substantial rate difference to be economically feasible!!!
 
For a confidential assessment, call Tom Day at 561-625-2677 extension 103.