1) Monica had a mortgage of $200,000.00 at 6.25%.  She was able to use a modification with her existing lender HSBC to reduce her interest rate and lower her payment by $140/month.  Her closing costs, (no mortgage tax on modification) to $2300.00 so by dividing the cost ($2300) by the monthly savings ($140) it shows that it will take her 16.5 months to recover her closing costs.  If Monica intends to be in the house for more than 17 months the refinance makes sense.
 
2) Lesley couldn’t do a modification and would have to pay mortgage tax again (1.8% on $200,000 = $3600.) so her closing cost was $5900.00.  Taking the closing cost ($5900) divided by the monthly savings ($140) it would take her 42 months to recover the closing costs.  Her plans were to remain in the home for a long period so the refinance made sense.

3) Sandra would be able to do a modification (like Monica) but her timeframe for remaining in the house was only 12 months.  After discussion she investigated an adjustable rate (ARM) but ultimately decided that since she intended to move that any monthly savings could not justify paying the closing costs.

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