The Cost of Refinancing an Mortgage

Three years ago, you bought a house. You took out a $350,000.00 mortgage at 4.75% for 30 years Now that interest rates have fallen (beginning of year 4 of your current mortgage), you are considering refinancing your existing loan with a new 30 year loan.

Your new loan must pay off the remaining balance of your old loan plus pay for all of the fees, associated with the new loan. In addition to all of the standard fees, you choose to spend 1% in points to buy down your interest rate to 2.5%.

All refinancing fees = $5,000

Points = 1%

How long will it take to payback the cost of refinancing your mortgage? What are the total savings over the life of the loan?