Most people don’t do the sweet spot. Most people refinance and pay what the monthly statement says. In that case, your mileage may vary.

Cutting short, math follows below. All of it really boils down to has the industry change compared to 2005-2011. Is no cost, no costs. No third party fees coming out of the woodwork?

So, how much hassle for $150/month? And even with some ‘costs’ creeping in, $150/month can pay.

In flu’s example, at 23 months, that’s pretty sweet spot. You will net close to $150/month ‘savings’ on the refinance if you pay the lower amount going forward (for the full 30 years). In the long run, the actual mortgages costs an extra $500 over the life of the loan. $500 30 years from now, LOL.

Total payments on the first loan for 30 years being $859,347. Payments on the refinance being, $54,903 towards the first and another $804,946 towards the second (over 30 years). Net $500 more trade off for $150 extra available cash per month.

That’s still a pretty deal IMHO.

If you are further in the loan, say four years, having made the first 48 payments, then refinancing and not making the increased payments will cost you $26,432 over the loan, again, monthly you pocket about $150, but the four extra years kill you.

The first loan still totals at $859,347. The first 48 payments weigh in at $114,580 and the refi-loan weighs in at $771,200 for a total payments to pay off of $885,780.

Of course, if you refi at 4 years in, keep making the prior payment, you will pay it off ‘early’ at month 299 of the new loan. It’ll save $33,039 over the current loan.

What’s $33,000 worth 25 years from now? About $17,500 assuming 2.5% inflation.

I get the lower rate will give more flexibility. I’ll have a “lower” outstanding principal at any given time, after eight years it’s finally $10K difference.