Is Refinancing Worth the Cost?

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Have you ever heard the old rule of thumb that states you should only consider refinancing if your new interest rate is at least 2 points under your present one? Maybe several years ago that was sage advice, but as refinance costs have been falling recently, it may be time to take a serious look. A refinanced loan can be worth its cost several times over, considering the advantages that it brings, along with a reduced interest rate.

Advantages

You could be able to lower your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with your refinanced mortgage. Additionally, you might be given the option of tapping into your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. You may have the option to refinance into a shorter-term mortgage loan, giving you the ability to build your equity quicker.

The Cost

All these advantages do come with some expense, though. With your refinance, you're paying for basically the same things you paid for during your original mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might consider paying points to reduce your interest rate. When you pay (on average) three percent of the mortgage loan amount at the start, your savings for the term of the refinanced mortgage can be great. We recommend that you talk to a tax professional before acting on advice that these paid points may be deducted on your federal income taxes.

An additional cost that a borrower might consider is that a reduced interest rate will reduce the interest amount you'll be able to deduct from your taxes. We can help you do the math! Call us at (800) 974-0509.

In the end, for most borrowers the total of initial costs to refinance are made up soon in savings each month. We'll work with you to find out which mortgage loan program is ideal for you, looking at your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing could have on your taxes. Call us at (800) 974-0509 to get started.

Curious about refinancing your home? Give us a call at (800) 974-0509.