or from Engineering Econ.

Elberto's post below got me looking into making a move. I currently have 17 years left on a 20 year mortgage, at 3.75%. So far I've seen 2 options where I could change to a 15 year mortgage, at either 3% with no closing costs, or 2.5% with about $5,700 closing costs.

My first thought was "hey, a savings of .75 to 1.25 points of interest and 2 less years of payment. Looking good.

But then I did the NPV. At a 9% discount rate (using the 2.5% rate with closing costs), the 2 scenarios have essentially the same NPV. At 4%, refinancing IS a better NPV, but it's only about $5,000 better.

If I look at 3% interest, but no closing costs, then the 2 scenarios are within maybe $1,500 of each other unless I presume a 0% time value of money.

I usually go where the numbers point me, and yes saving $5,000 over the next 15 years is appealing, but the hassle of doing the refinance just doesn't seem to be worth it. Arranging for someone to do the appraisal and to be home for them. A couple of hours signing 25,000 sheets of paper. All so we can pay $10 more a month (remember, going from 17 years left to 15) so that we can cut off the last 2 years. And the $5,000 'gain' is at 4%. If I presume that my best alternative use of capital is better than that, then benefit of doing this drops.