During times of low interest rates, many home owners look to refinance their mortgage to gain some savings.
On a balance sheet, a mortgage is a liability and is used as one part in calculating a household’s net worth.
The first step in determining the impact of mortgage refinancing is looking at the payback period, which involves calculating the following:
∑ = Monthly Refinancing Savings @ lower interest rate > ∑ = Costs of Refinancing
When reviewing the numbers above, look to see what month the savings are larger then the costs of refinancing.
