With the drop in rates on Tuesday, I took a peak at mortgage rates and started thinking of the various ways to measure whether refinancing made sense. I could not come up with a good measure (financially) in some cases.
The question: Is there a way to quantify the "additional time" added to the repayment term when refinancing?
Bought house Dec of 05 refinanced June of 06 (added 8 months to repayment terms, lowered rate by .5%)
Currently a P&I payment of $1689.44. original LTV of 80%, $289,900 financed at 5.75% 30 year fixed.
How do you measure the fact that a loan of the same rate (30 year fixed) would lower the payment today, simply because I have paid down about $3400 of principal?
If I were to refinance 30 year fixed at 4.5% or 4% the extra 3 years I add on to my loan repayment schedule is more than enough to compensate me because I save more than $300 each month on the mortgage. I could easily send $12000 extra over the next 40 months to pay the principal down and get the extra 3 years back. If I invested the $300 I would come out even further ahead.
If I were to refinance 30 year fixed at 5%, I save more than $130 per month on the P&I, but the added 3 years of payments (from the original
2035 payoff year). This does not appear worth the money: ($130*27*12=) $42000 over 27 years of payments I would save.Is there a way to quantify the "additional time" added to the repayment term when refinancing?