Real Estate Math
A Texas homeowner refinances their $220,000 mortgage to a lower rate. Closing costs are $4,500. The new payment saves $200/month compared to the old payment. How many months until the break-even point?
A22.5 months✓ Correct
B18 months
C45 months
D12 months
Explanation
Break-even months = Closing Costs / Monthly Savings = $4,500 / $200 = 22.5 months. After 22.5 months, the borrower will have saved enough on payments to recoup the closing costs. If they plan to stay longer than 22.5 months, the refinance makes financial sense.
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