Finance
A Florida borrower wants to refinance their mortgage. The 'break-even point' for refinancing is calculated as:
AThe difference between the old and new interest rates
BClosing costs ÷ Monthly savings from the new payment✓ Correct
CThe new loan balance minus the old loan balance
DThe total interest saved over the life of the loan
Explanation
Break-even point = Closing Costs ÷ Monthly Savings. If refinancing costs $4,000 and saves $200/month, the break-even is 20 months. If the borrower plans to stay beyond that point, refinancing makes financial sense.
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