Is Refinancing Worth the Cost?

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Have you ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least two points lower than your present one? Maybe several years ago that was good advice, but as refinance costs have been getting lower, it may be a good time to look into it. A refinance can be worth its cost several times over, because of the advantages that come, along with a reduced interest rate.


When you refinance, you may have the ability to reduce your interest rate and monthly payment amount, perhaps by a lot. You may also have the ability to "cash out" a portion of your equity, which you will be able use to consolidate debts, make home improvements, or plan a vacation. You could be able to refinance to a shorter-term mortgage, enabling you to add to your equity faster.

The Cost

As you probably expect, you will have some fees and expenses during the the refinance process. With your refinance, you're paying for basically the same things you paid for at the time you obtained your existing mortgage loan. These can include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Do the Math

You could need to pay discount points (prepaid interest) to attain a more favorable rate of interest. Your savings on the life of the mortgage may be significant if you've paid up front about three percent of the new loan balance. Please consult with a tax professional before acting on advice that the points paid may be deducted on your taxes.

Speaking of taxes, when you bring down your interest rate, it follows that you will also be reducing the interest amount that you'll be able to deduct from your federal income taxes. This is one more expense that borrowers take into account. Call us at (800) 974-0509 to help you do the math.

Most people find that the savings each month quickly balance out the up-front expenses of refinancing. We can help you explore what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your money on hand. Call us at (800) 974-0509 to get you started.

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