refinance nowImage by TheTruthAbout via Flickr

When deciding whether or not to refinance there are a number of things to consider. These include things like: how long you plan to stay in the house, how much cash you have available for closing costs, and how much lower your new interest rate will be.

But most people, including me, want a simple straight forward bottom line analysis that indicates: is it worth it or not?

The answer here is a comprehensive breakeven analysis. This analysis looks at payback time based on the principal balance not only on the payback for the closing costs.

The main reason is that just looking at the payback of the closing costs is not the best way to reveal the overall costs associated with refinancing a loan, which means restarting your loan repayment schedule of payments (amortization table).

The best way to see this is to plot out the principal balance each month over the life of the loan for your current loan versus each of the options that you are considering.

For my analysis we had 3 options and we needed to roll most of the closing costs into the loan because we decided that we wouldn’t use our emergency fund to refinance. We also determined that what ever savings we achieved on the monthly payment we would just roll it in and continue paying the same amount as our original payment.

Building each of these things in to excel I created the amortization tables for all 4 situations (original plus 3 options). I then plotted the monthly principal balance over the life of the loans. This graph clearly shows the real breakeven point for each of the options. As in, how many months from now will the refinance options begin to have a lower principal balance than the original loan. This is the TRUE breakeven point.

Below are some screen shots from my personal spreadsheet analysis. Click images to enlarge.
If there is enough demand I could make the spreadsheet available for download.

Option Details:
Notes & Explanations:
Breakeven Analysis Graph:

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Yesterday Matt Jabs of Debt Free Adventure out of Lansing, Michigan asked a question on Twitter that intrigued enough to respond. My response was actually included in his recent post (here).
Here’s the question as posted on his twitter timeline:

So what was my response?
LRG of Financial Family Life testified:
sacrificed: HD TV & DVR, blessing: watched too much TV anyway! now more family time

To elaborate...
Just before our son was born, we, my wife and I, made the decision to drop the following:
• Movie Channels
• Extended Cable

How was this a blessing? Basically, I have come to realize as our son is approaching 2 years old and #2 is on the way, that the less TV there is to watch, the more time you have to spend with you family. Do we miss HDTV, yes (looking at antennas now for FREE ota). Do we miss the movie channels, no. Do we miss the DVR, absolutely! But it’s all worth it! Especially when you can cut your cable TV service by 50%!

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'Young Conservative Anthem' Causes Internet Buzz - Political News -

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Wal-Mart's Impact on Price

Posted by Lance | 7:08 AM | | 0 comments »

In 2007, independent research from Global Insight shows that the reduction in
the price level due to the presence of Wal-Mart translates directly into savings
for consumers amounting to $287 billion in 2006. This corresponds to savings of
$957 per person and $2,500 per household, regardless of where consumers
choose to shop
. That is, even consumers who shop at Target, Best Buy or
Office Depot save money from the presence of Wal-Mart, due to the competitive
pressure of Wal-Mart's "Everyday Low Prices."

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GRAND RAPIDS, Mich. (WOOD) - Personal financial guru Dave Ramsey, known around the nation for helping Americans get out of debt and live in financial peace, spoke Thursday night Van Andel Arena in Grand Rapids.
24 Hour News 8's Suzanne Geha talked with him prior to the event.

Check this out: 16-page introduction of I Will Teach You To Be Rich book