Don't refi for the wrong reasons

Breakeven period should take no more than 4-5 years

In a recent article on lifestyle mistakes by mortgage borrowers, I gave an example of such a mistake that touched a nerve on the part of some readers. I said in the article that many borrowers would find irresistible the deal I labeled a mistake, and I was right. Some readers did find the deal I described as irresistible, and were completely convinced that I was wrong in saying that it was a loser.

The borrower in my example had a 6 percent loan with a $200,000 balance and 10 years to go. She is offered a 5.75 percent refinance for 30 years that will reduce her monthly payment from $2,220 to $1,267. Although the borrower was not required to put up any cash, upfront charges amounting to $17,000 had to be financed — that is, included in the loan amount.