Module 16: Refinance Strategy

The most important question in a refinance conversation: When does this make sense financially for the borrower? The break-even analysis answers it. Break-Even Calculation Break-even = Total closing costs ÷ Monthly savings. Example: Current rate 7.25%, payment $2,480. New rate 6.50%, new payment $2,300. Monthly savings: $180. Total closing costs: $5,400. Break-even: $5,400 ÷ $180 = 30 months. If the borrower plans to stay more than 30 months, the refinance makes financial sense. Presenting the Break-Even If we refinance, your payment drops by $180 per month. Closing costs are about $5,400, which we can roll into the loan. At $180 per month in savings, you break even in 30 months. After that, every month is pure savings. Over five years, you would save about $5,400. Does that match your plans? No-Cost Refinances Wraps closing costs into a higher rate. Instant positive cash flow — lower payment immediately, no upfront cost. Best for: Borrowers who do not plan to stay long, who want certainty that the refinance is always break-even-positive, or who do not have access to closing cost cash. Term Changes and True Cost Analysis Refinancing into a new 30-year term when there are 22 years left extends the payback period — even at a lower rate, the borrower may pay more total interest. Always run the total interest comparison alongside the payment comparison.