When is Refinancing Worth it?

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It has been said that only if your new interest is at least 2 points lower, should you refinance your mortgage. Perhaps several years ago that was good advice, but as refinance costs have been falling recently, it could be a good time to look into it. Refinancing has a number of benefits that will often make it worth the initial cost many times over.

Benefits

You might be able to bring down your interest rate (sometimes substantially) and make smaller monthly payments with a refinanced mortgage loan. You may also be able to "cash out" a portion of the built-up equity in your home, which you will be able use to consolidate debts, make home improvements, or plan a vacation. With reduced interest rates, you might also get the chance to build up home equity faster by switching to a shorter-term mortgage loan.

Expenses and Fees

As you probably expect, you'll have some fees and expenses during the the refinance process. With your refinance, you're paying for basically the same things you were charged for during your existing mortgage. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

Paying discount points can result in a better interest rate. The money you'll save over the life of the mortgage could be substantial if you have paid up front about three percent of the new loan balance. We recommend that you consult with a tax professional before acting on advice that any points paid can be deducted on your federal income taxes.

Speaking of taxes, if your interest rate is lowered, of course you'll also be lowering the interest amount that you can deduct on your taxes. This is one more cost that borrowers take into consideration. Call us at (800) 974-0509 to help you do the math.

Most borrowers find that the savings per month outweigh the up-front cost of refinancing. We can help you explore what your options are, considering the effect a refinance may have on your taxes, if 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.

Want to know more about refinancing your home? Give us a call at (800) 974-0509.