I just posted a new article on the Time Value of Money (TVM) principles for refinancing your home.
I just heard some ridiculous financial advice from a “personal finance guru” regarding refinancing your home mortgage.
Refinance to a lower interest rate.
Refinance to a shorter amortization term (number of payments to pay off).
Refinance only when you can recover the closing costs during the time that you will stay in the home. That is, divide the closing costs by the monthly savings to calculate the number of months to stay in the home to recover the closing costs.
Now these seem like good ideas for financially illiterate folks. Let’s take a closer look at them in relation to the principles of Time Value of Money (TVM).
You can read more of the article by clicking here.