Trying to decide if it’s worth it to refi. New loan would drop monthly payments by $800 and payout ~$20k upfront (2 months mortgage and remaining escrow) but slow my home equity growth. I’ve been comparing the difference in home equity in each successive year vs the expected value of investing that $20k and $800 monthly. Break even for the comparison is two years. Does that method make any sense? Any different recommendations for how to compare current loan vs potential refi?

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In general when refinancing compare the interest rate you would be paying and any cost to refi....then make sure you plan on staying another three years. You then solve the slower equity problem by making extra payments to principal.

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Why are you worried about home equity? People who refi look at how much it will lower their monthly payment or how much it will save them in interest.

If you're refinancing for the lower payments, then there is more importance reason there. You want more cash flow for whatever reason. If you don't need more cash flow, maybe consider a shorter loan term, as the rates are usually more favorable.

If you're refinancing to save on interest, make sure there are no prepayment penalties and just pay the same exact amount as you were before. It might take a little while to get back to wher you were with equity because of the closing costs wrapped into the loan, but after that your equity in your house will grow much quicker. You'll be putting more towards the principal instead of interest. You will pay less absolute $$$ to pay off the loan. If you don't plan to stay in your house until that breakeven point, refinance doesn't make sense, unless there is another reason for refi, namely, you need the cash.

I only have $130k left on my loan, so my breakeven is around 1-2 years.

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My thinking is how can I increase my net worth the most. I don’t want to increase cash flow at the expense of net worth. Does that make sense, or would you look at it differently?

Home equity returns 0%, so I’m not worried about my principal pay down speed.

Then as long as you are investing your savings you should be fine. $100k in the market is an infinite times better than $100k in home equity.

Thanks all. For context, I’m looking to maximize net worth. Not interested in home equity, per se, but am trying to figure out which option will increase my net worth the most over time.

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