Wednesday, April 7, 2021

Just the Facts: The “Break Even Point” of Refinancing

When considering refinancing your mortgage loan at Lake of the Ozarks, there are several factors you need to account for. First, you’ll want to ensure that it’s a wise investment for you. You’ll also want to consider what your future plans are for the home. You may have heard about the term “break-even point” regarding a mortgage refinance. But what is it exactly? Well, in this week’s blog, the best mortgage lender at Lake of the Ozarks, Team Lasson is here to tell you all about the break-even point and how it can benefit your decision to refinance.

What is the Break-Even Point?

The break-even point is the point where the savings from your refinance equals the total cost to complete the transaction. This can be figured by taking all the costs associated with the refinance such as:

·         Lender fees

·         Title Costs

·         Third-party costs

·         Escrow charges

And then taking the total closing costs divided by the savings you’ll receive per month (or annually). This will tell you how long it will take you to recoup the cost (the break-even point) of refinancing your mortgage.

Other Factors Beyond the Break-Even Point

There are other factors that you’ll want to consider beyond the break-even point to determine if refinancing your existing mortgage is a smart financial move for you. Things such as:

·         Is this your “forever” home or your “for now” home?

·         How much have you paid down on your mortgage/What’s the remaining balance?

·         How long have you had the mortgage?

The reasoning these items are important is because they can have a direct impact on how long of a break-even point makes sense. For instance, if you are planning on owning the home for 2-3 more years, a break-even point of 5 years simply wouldn’t make sense from a financial standpoint. However, if you’re planning on this being your “forever” home and have many years left on your mortgage, a longer break-even point could make for smart investing.

Other Ways to Make Big Savings on Your Mortgage

Another way that you can save big money over time on your mortgage is by refinancing to a lower term. While this route will not lower your monthly payments, it will save you a large sum of interest over the course of your loan. So, depending on your future plans for the home, this could save you thousands of dollars if you plan to keep it for some time.

While there is no general rule of thumb for when refinancing is a smart decision, as the answer depends on a multitude of factors. However, you can always consult with me when considering refinancing your mortgage at Lake of the Ozarks. I will work with you, based on your plans for the home and financial structure, what smart investment options you have when financing your home. Being your premier mortgage lender at Lake of the Ozarks, I look forward to homeownership needs!

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Michael Lasson
Senior Loan Officer
NMLS #: 493712

4655 B Osage Beach Parkway
Osage Beach, MO 65065

**The postings on this site are my own and do not necessarily represent First State Bank of St Charles’s positions, strategies, or opinions.

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