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I am 2 years into a 5 year fixed term @ 5%.

Principal outstanding is probably around $105,000 at this time.

The IRD penalty for breaking right now is $4,300.

My goal at the start of the term was to pay off the entire mortgage by the end of this term in 2012 (i.e. after another 3 years).

So far that's on track.

So my question is - given the above facts, does it make mathematical sense for me to attempt a refinance at this time?

I haven't shopped for rate quotes yet, but I'm expecting I can get something between 3.35% - 3.85% for a 3 year term (because I would still like to pay off the principal in 2012).

Most of the online calculators I have been plugging the numbers into are not coming up with meaningful answers because of the mortgage payoff fact.

Essentially what I need to determine is whether an interest rate reduction from 5% to approx. 3.50% for next 3 years will save me more than $6,000 or not ($4,300 penalty + approx. $1,700 for closing).

I suppose I better estimate the effort to shop for a mortgage and the effort to do all the paperwork as well - my and the better half's time, driving costs, phone calls, etc.

So let's say I need to save at least $7,000 for this to be worthwhile ($4,300 + $1,700 + $1,000).

Make sense?

-Harold