If let’s say your interest rate is 6% but you want to refinance to 4% and it costs 2% to refinance, doesn’t that just make it the same number in the end? Google says the cost of refinancing is roughly 2-6% of the full loan. I don’t get how it makes it cheaper to refinance? Just seems like you’re paying the money upfront then. Please eli5! Feel like I’m missing something.
In: Economics
A 6% loan is 6% *per year*, you don’t just pay the interest once and then it goes away. You’re paying 6% interest on the principal balance for 30 years.
Paying 2% *one time* to reduce that to 4% interest for the next 20 years usually makes good financial sense.
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