I had to report with a more explicit title.
I’ve agreed to pay $375 to lower my interest rate from 6.125% to 5.75%. My broker said it’s a great deal and locked it in for me today. However, I’m not sure how long it will take to make up for the $375 cost. Can anyone here help me figure that out?
I’m in NY.
ETA: loan amount is $300k
Thanks.
Even if your loan amount is $30,000, it would still make sense, lol.
Oops, I forgot to include the amount. I’ll update the post. It’s $300k.
Oh, if you don’t accept that deal, I’ll track you down.
Haha, I accepted the deal.
To find the time it will take to recover the fee, divide the difference in payment by the cost.
To calculate the recoup period, compare the payment amount at a 6.125% interest rate to the payment amount at a 5.75% interest rate. Divide the difference in payments by the cost to find out how long it will take to recoup the cost.
While $375 might seem inexpensive, it is for a relatively small loan amount.
About two months, I think. It’s definitely a good deal. Thanks.
If your broker can’t provide the recoup time, they’re not doing their job properly. It’s straightforward math and takes only a few seconds. Just divide the difference between the two payments by $375. For example, if there’s a $40 difference per month, you’d calculate $375 divided by $40, which equals 9.375 months.
Thank you.
The timing was unfortunate; I had just returned home from a wake. I was mainly focused on absorbing the information.
That doesn’t seem quite right. At a 6.125% rate, there should be a lot of credits available compared to the 5.75% rate with a $375 cost. While a 5.75% rate with a $375 cost is decent, I think the credits at 6.125% should be considered for a proper break-even analysis.