Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that states you should only consider refinancing if your new interest rate is at least two points under your present one? Maybe that was sound advice several years ago, but as refinance costs have been falling recently, it could be a good time to take a serious look. Refinancing your mortgage loan has some advantages that often make it worth the up-front cost several times over.

Advantages of Refinancing

You could be able to bring down your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with your refinanced mortgage loan. You could also have the ability to "cash out" some of your home equity, that you are able use to take care of higher interest debts, make home improvements, or finance a vacation. You may have the option to refinance into a shorter-term mortgage loan, enabling you to build your home equity faster.

Expenses and Fees

All these advantages do come with some expense, though. You will have to pay the same sort of fees as with your existing home loan. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might consider paying points to receive a lower interest rate. When you pay (on average) 3% of the mortgage loan amount at the start, the savings for the life of the new mortgage can be significant. You may have heard that points may be tax deductible, but as tax regulations are difficult to keep up with, we urge you to consult with a tax professional before depending on this.

Another cost that borrowers might consider is that a reduced interest rate will reduce the interest amount you'll be able to deduct on your taxes. We can help you do the math! Call us at 7072522700.

All things considered, for most people the total of initial costs to refinance will be paid back soon in savings each month. We will work with you to figure out what mortgage loan program is best for you, looking at your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing may have on your taxes. Call us at 7072522700 to get started.

Curious about refinancing? Give us a call at 7072522700.

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