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.

5 Likes

Even if your loan amount is $30,000, it would still make sense, lol.

5 Likes

Oops, I forgot to include the amount. I’ll update the post. It’s $300k.

5 Likes

Oh, if you don’t accept that deal, I’ll track you down.

5 Likes

Haha, I accepted the deal.

4 Likes

To find the time it will take to recover the fee, divide the difference in payment by the cost.

4 Likes

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.

3 Likes

About two months, I think. It’s definitely a good deal. Thanks.

2 Likes

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.

2 Likes

Thank you.

The timing was unfortunate; I had just returned home from a wake. I was mainly focused on absorbing the information.

1 Like

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.