What is the payback period for refinancing a mortgage that costs $12,000 and saves $500 per month?

To determine the payback period for refinancing a mortgage, it's essential to calculate how long it will take for the savings generated by the refinancing to cover the initial cost of $12,000.

In this scenario, the savings from refinancing is $500 per month. To find the payback period, you divide the total cost of refinancing by the monthly savings:

Payback period = Total cost of refinancing / Monthly savings

Payback period = $12,000 / $500 per month = 24 months

This calculation shows that it will take 24 months or 2 years for the refinancing costs to be fully recouped through the savings on the monthly mortgage payment. Therefore, the correct answer reflects that the financial benefit from the refinance will be received over a two-year period, making the option referring to two years accurate.