Depends on whether or not the fees can be recuperated in the amount of time you’ll be holding the mortgage for. Most folks keep their mortgage for release 5 to 7 years sometime sooner based upon interest rate changes, but at least 60 months.
Closing costs are inevitable part of every mortgage refinance transaction. The lender can offer you a lender concession in some instances that creates a no-cost mortgage at the expense of paying a higher interest rate over the term of the loan, for example 360 months on a 30 year fixed rate mortgage.
Paying the closing costs in exchange for a lower interest rate usually makes more sense because of the fact the interest savings over the term of the loan are far greater than the one-time fees paid in accordance with taking out a home loan.
One-time fees being what are referred to as nonrecurring closing costs.
If you plan to refinance your home and closing costs costs $3000 for example, but you are saving $250 per month, you can break even by simply taking the total closing costs divided by the amount of monthly savings which would generate in this particular example- 12 months. Not a bad deal at all if you plan to be in the property for 60 months anyway right?
Other ways to compute the recapture include doing an interest savings. For example if you have a 30 year mortgage, and you are refinancing into a 15 year mortgage, the payment is likely going to rise, even with a lower interest rate, so the interest savings could be used to generate the recapture time on paying closing costs- here’s a recent blog post discussing how to calculate refinancing re-capture.
If you would like to receive a complimentary mortgage rate quote, we can walk you through the various ways to examine your loan figures.