Refinance Cost is high
I got 30 years loan for 232K two years ago with interest rate of 4.25% and now I am planning to refinance again for 15 years. Financial company mentioned they can provide interest of 2.85% but the problem here is if I sum up all the amount then whatever I paid this two year is waste because I end up in loan amount more than my previous loan amount. Any place that I can save some cost? My credit score is good and I never missed any point. Your help is highly appreciated.
Purchase Price/Payoff 6,500.00
Total Estimated Closing Costs ,113.25
Total Est. Reserves/Prepaid Costs 6.46
Discount Points ,710.00
Total Costs 5,209.71
Loan Amount 5,500.00
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The important figure is how much interest you are saving each month by refinancing, which is what offsets the upfront cost of refinancing over time. (For simplicity, I'm ignoring the increase in your monthly payment realized by moving from a 30-year to a 15-year mortgage and assuming you are OK with the trade-off to pay down the principal faster.)
On your initial mortgage, you started paying ~0/month in interest, and that amount decreases over time. After 2 years, you are paying ~3/month.
On your new mortgage, you will start paying ~0/month. That means in the first month alone, you have have saved ~0. Even if the amount of interest you owe decreases at the same rate in both mortgages (spoiler: it does not; it decreases more quickly with the new one), you would expect to break even after 00/230 = 38 months. (Because if the faster pay-down rate, the breakeven point will actually be somewhat less than 38 months.) Pay the mortgage off sooner, and you would have been better off not refinancing; otherwise, you'll come out ahead.
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