When is Refinancing Worth it?

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It has been said that only if your new interest will be at least 2 points lower, should you refinance your mortgage. Perhaps several years ago that was sage advice, but as 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, along with a reduced interest rate.

Benefits from Refinancing

When you refinance, you may have the ability to reduce the interest rate and monthly mortgage payment amount, perhaps significantly. Additionally, you may be given the option of pulling out some of the equity in your home by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. You might be able to refinance to a shorter-term mortgage, enabling you to build your home equity faster.

Expenses and Fees

All these benefits do come with some expense, though. When you refinance, you're paying for basically the same things you were charged for at the time you got your existing mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

Paying points can result in a lower interest rate. When you pay (on average) three percent of the loan amount initially, the savings for the term of the new mortgage loan can be significant. You may be told that the points may be deducted on your income taxes, but because tax regulations can be ever-changing, we urge you to consult your tax professional before making any decisions based on this.

Another thing about taxes is that once you bring down your interest rate, of course you'll also be reducing the paid interest amount that you'll be able to deduct on your federal income taxes. This is another cost that borrowers consider. We can help you do the math! Call us at (800) 974-0509.

Most borrowers find that the monthly savings quickly balance out the initial cost of a refinance. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at (800) 974-0509 to get started.

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