Usually, 1 percent will not justify the cost.

Looks like I can recover the closing costs in only 6 months, then save $500 per month thereafter...is that a bad deal?

If true, it sounds good. But you gotta remember that you've added another year + of those "lower" payments to the life of your mortgage.

Everybody's situation is different. Will you keep the home until it's paid off or will you sell it in a couple of years?

Have you looked at an amortization program to make comparisons? I have questionss about saving $500 per month with a one percent reduction in interest -- how much is your mortgage, 2 million $$ ??
Perhaps a chunk of that saving is no longer paying Private Mortgage Insurance (PMI)?? If so, that's a plus.

[This message has been edited by rpxlpx (edited December 10, 2002).]

a 1% savings on a refinance is actually excellent. the money you are saving is in interest that is why you realize such a savings not becasue you are paying less money towards your principal, just less in interest. The basic guidline to refinance or not is will you recover your closing costs in one years time and if the new rate is between 3/4 and 1% lower than the old one. I'm a realtor and see all kinds of financial situations, and in this case you are ahead of the game, keep up the good work. and if you are going to be saving a good amount of money a month apply a bit extra to the principal. that will bring the time of your mortgage down. 1 extra payment per year can shave about 6 years off of a 30 year mortgage

rmurray223, I'm not a realtor, but I can read an amortization schedule. And I know that every person's case is different.

Most people never pay a 30-year loan to the end, whether it's in 30 years or 24.
IMO, the information presented here is not enough for anyone to say absoloutely for certain whether it's a good idea to do this refinance.

I'm still questioning that 500 per month improvement with a 1% drop in rate. It appears to me that at current rates, you improve by 500 per month on a loan of around 900K$. And I suspect that the poster isn't refinancing a million-plus dollar house. (could be wrong, though)
If I'm right, where's the difference coming from? a reduction or removal of PMI? a misleading number that leaves out taxes and insurance?
There's just not enough info here to give conclusive advice.

[This message has been edited by rpxlpx (edited January 06, 2003).]

im guessing it is dropping pmi as well, or it could be a number thrown out in the blue, or maybe an assemsent is cut out. but whatever the case generally if you cant save atleast 3/4-1% id say skip it and wait a bit.

closing costs -dreaded part of home purchase..

1 percent is less I guess.