Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that says you should only consider refinancing if your new interest rate is at least two points under your current rate? Maybe several years ago that was good advice, but since refinance costs have been getting lower, it may be time to take a serious look. A refinance is often worth its cost several times over, considering the advantages that it brings, in addition to a reduced interest rate.

Advantages

You could be able to lower your interest rate (sometimes by a lot) and reduce your mortgage payment amount with your refinanced mortgage. You might also be able to "cash out" a portion of your home equity, which you can use to consolidate debts, improve your home, or take a vacation. With reduced interest rates, you might also get the chance to build your home equity faster by switching to a shorter-term mortgage.

Fees and Expenses

All these benefits do come with some expense, though. You will have the same sort of fees as you did with your current mortgage. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Do the Math

Paying discount points can result in a better interest rate. When you pay (on average) three percent of the loan amount at the start, your savings for the term of the refinanced mortgage can be great. You might have heard that the points may be deducted on your income taxes, but as tax regulations are difficult to keep up with, we urge you to speak with a tax professional before considering this in your calculations.

Speaking of taxes, when you lower your interest rate, naturally you will also be reducing the paid interest amount that you can deduct from your federal income taxes. This is one more cost that borrowers take into account. We can help you do the math! Call us at (800) 974-0509.

All things considered, for most the total of up-front costs to refinance are paid back very quickly in monthly savings. We will work with you to determine which mortgage program is the right fit for you, considering your cash on hand, the likelihood of selling your house in the near future, and the effect refinancing could have on your taxes. Call us at (800) 974-0509 to get you started.

Want to know more about refinancing your home? Call us: (800) 974-0509.