Is Refinancing Worth the Cost?

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Ever heard the pearl of wisdom that says you should only refinance if your new interest rate is at least two points below your present one? Maybe several years ago that was good advice, but as refinance costs have been falling recently, it may be time to take a serious look. A refinance is often worth its cost several times over, because of the benefits that come, along with a reduced interest rate.

Benefits from Refinancing

When you refinance, you could be able to lower the interest rate and monthly payment , sometimes significantly. Additionally, you might be given the option of pulling out some of your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or take your family on a vacation. With lower interest rates, you might also be able to build up home equity faster by moving to a shorter term loan.

Expenses and Fees

As you probably expect, you will have to pay for the process of refinancing. When you refinance, you're paying for basically the same things you paid for during your current mortgage. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might offer to pay points (prepaid interest) to attain a better rate of interest. Your savings over the life of the mortgage might be significant if you've paid up front about 3% of the new loan balance. Please talk to a tax professional before acting on rumors that the points paid can be deducted on your federal income taxes.

Another expense that a borrower might take into account is that a lower rate of interest will reduce the interest amount you'll deduct on your taxes. We can help you do the math! Call us at 754-202-4376.

Ultimately, for most borrowers the total of initial costs to refinance will be paid back soon in monthly savings. We can help you explore your options, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at 754-202-4376 to get you started.

Curious about refinancing your home? Give us a call at 754-202-4376.

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