I'm trying figure out how long it will be to recoup the cost of refinancing our present mortgage.
I'm doing this for 2 reasons a) b/c the interest rate I could get is about 0.75% less than I pay now and b) I want the option of a longer term mortgage, by which I really mean lower monthly payment since I might buy a diff house and rent my present one (so I want a lower rental price to be competitive).
I have tried a couple calculators online (e.g. BankRate) but don't think they really giving me a correct answer, since a) I'm switching number of years of the loan and b) I have being paying a bit more than the minimum monthly payments (online ones seem to let you enter that).
My thought was just use a regular loan calculator (v.s some break even mortgage\refin calculator) and then use:
- the amount left on my mortgage
- the % rate
- the # years left (since I would continue the same payment amount and only change if I actually bought a diff house and rented this one)
This should give me the interest I will pay on the rest of my present mortgage. Then use the same amount and number of years, but uses the new % rate to give me the amount of interest I would pay on a refinanced mortgage.
Then compare the difference in interest paid to the closing costs. If the diff is equal or more than the closing costs (e.g. 4000 less paid in interest v 2000 closing costs) then it is in general a good deal.
Any flaws in my thought process or any other points I'm not taking into account?