d his 30th payment with the new loan. (Remember, it is going to take 30 payments to recover his closing costs.) Answer: $133,085 at a monthly payment of $1,233.

Then I asked him what his principal amount owing would be if he just kept paying another 30 months on his current loan plus th

I told my son that normal closing costs for a re-fi of $148,638 at 6.5% for 30 years is $2,500. Total closing costs for his $134,999 proposed loan were $5,412, only $2,912 more. So I asked him "Could you be paying too much for closing costs?" Answer: Yes.

Then we looked at his original principal balance owing of $123,773 versus his new principal amount owing of $134,999 should he accept the loan. I pointed out that he is losing $11,226 before he even starts servicing the new loan. Yes, he is getting a home equity loan of $10,409, but what is he really gaining? Answer: Nothing. He is losing again.

Then we calculated the closing cost recovery rate of $5,412 using a financial planning program. He learned it would take 30 months of payments just to recover his closing costs. I pointed out that until you recover your closing costs you have not saved a cent in the transaction.

He had already made 12 payments on his existing $123,773 loan, reducing his principal amount owing to $122,623. He had earned $1,150 in equity by making 12 payments at $862 a month.

Then we looked at what his principal amount owing would be when he reached his 30th payment with the new loan. (Remember, it is going to take 30 payments to recover his closing costs.) Answer: $133,085 at a monthly payment of $1,233.

Then I asked him what his principal amount owing would be if he just kept paying another 30 months on his current loan plus the

original principal balance owing of $123,773 versus his new principal amount owing of $134,999 should he accept the loan. I pointed out that he is losing $11,226 before he even starts servicing the new loan. Yes, he is getting a home equity loan of $10,409, but what is he really gaining? Answer: Nothing. He is losing again.

Then we calculated the closing cost recovery rate of $5,412 using a financial planning program. He learned it would take 30 months of payments just to recover his closing costs. I pointed out that until you recover your closing costs you have not saved a cent in the transaction.

He had already made 12 payments on his existing $123,773 loan, reducing his principal amount owing to $122,623. He had earned $1,150 in equity by making 12 payments at $862 a month.

Then we looked at what his principal amount owing would be when he reached his 30th payment with the new loan. (Remember, it is going to take 30 payments to recover his closing costs.) Answer: $133,085 at a monthly payment of $1,233.

Then I asked him what his principal amount owing would be if he just kept paying another 30 months on his current loan plus th

wer: Nothing. He is losing again.

Then we calculated the closing cost recovery rate of $5,412 using a financial planning program. He learned it would take 30 months of payments just to recover his closing costs. I pointed out that until you recover your closing costs you have not saved a cent in the transaction.

He had already made 12 payments on his existing $123,773 loan, reducing his principal amount owing to $122,623. He had earned $1,150 in equity by making 12 payments at $862 a month.

Then we looked at what his principal amount owing would be when he reached his 30th payment with the new loan. (Remember, it is going to take 30 payments to recover his closing costs.) Answer: $133,085 at a monthly payment of $1,233.

Then I asked him what his principal amount owing would be if he just kept paying another 30 months on his current loan plus th

cent in the transaction.

He had already made 12 payments on his existing $123,773 loan, reducing his principal amount owing to $122,623. He had earned $1,150 in equity by making 12 payments at $862 a month.

Then we looked at what his principal amount owing would be when he reached his 30th payment with the new loan. (Remember, it is going to take 30 payments to recover his closing costs.) Answer: $133,085 at a monthly payment of $1,233.

Then I asked him what his principal amount owing would be if he just kept paying another 30 months on his current loan plus th

d his 30th payment with the new loan. (Remember, it is going to take 30 payments to recover his closing costs.) Answer: $133,085 at a monthly payment of $1,233.

Then I asked him what his principal amount owing would be if he just kept paying another 30 months on his current loan plus the 12 months he had already paid. Answer: $119,342 at $898 a month.

The lights began to turn on in his mind. Now he recognized that he would be $13,743 ahead in principal owing if he just kept paying on the existing loan at the lower monthly payment ($335 less!).

This sudden revelation begged the question: How can this be? Answer: The interest on mortgage loans is front loaded. He learned that if he went for this nationally known lender's great loan deal that he would be making loan payments for 30 months (2.5 years) and still owe $13,743 more in principal balance than if he kept his present loan and paid $335 less in his monthly payment.

Finally we looked at what it would cost to service both loans. His current loan had 348 months remaining (29 years) at $898 monthly. Total cost? $312,504. The proposed loan had 360 months remaining (30 years) at $1,233 monthly. Total cost? $443,880. The difference? $131,376.

Just how badly did he need that home equity loan? Answer: Not at all.

And how much would he save in actual dollars by not accepting the proposed re-fi from the lender who was supposedly helping him out? Answer: $157,495.