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 2 points lower than your present one? Maybe that was good advice a number of years ago, but since refinance costs have been getting lower, it could be time to look into it. Refinancing your mortgage loan has a variety of advantages that often make it worth the up-front expenditure a few times over.

Benefits from Refinancing

You may be able to lower your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with a refinanced loan. You might also have the option to "cash out" some of the built-up equity in your home, that you are able use to take care of higher interest debts, add on to your home, or finance a vacation. With reduced interest rates, you may also be able to build your home equity faster by moving to a shorter-term mortgage loan.

Expenses and Fees

All of these advantages do come with some expense, though. You will pay the same kinds of expenses and fees as you did with your current mortgage loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

Paying points can get you a better interest rate. When you pay (on average) 3% of the loan amount up front, your savings for the term of the refinanced mortgage loan can be substantial. Please talk to a tax professional before acting on hear-say that the paid points can be deducted on your taxes.

An additional cost that a borrower may take into account is that a lower rate of interest will reduce the interest amount you'll deduct from your federal income taxes. Call us at 754-202-4376 to help you do the math.

Most borrowers find that the monthly savings quickly outweigh the up-front cost of a refinance. We can help you figure out your options, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your cash on hand. Call us at 754-202-4376 to get started.

Want to know more about refinancing? Give us a call: 754-202-4376.

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