Is Refinancing Worth the Cost?

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It has been said that only in the case your new interest is at least 2 points under your current rate, should you refinance your mortgage. Perhaps that was good advice a number of years ago, but since refinance costs have been falling recently, it may be time to take a serious look. A refinanced mortgage is often worth its cost many times over, considering the benefits that it brings, along with a reduced interest rate.

Advantages

You may be able to lower your interest rate (sometimes substantially) and have smaller monthly payments with a refinanced mortgage. You might also have the option to "cash out" some of your home equity, that you may use to take care of higher interest debts, make home improvements, or take a vacation. You could have the option to refinance to a shorter-term mortgage loan, giving you the ability to build your equity quicker.

The Cost

All these benefits do cost something, though. You will pay the same kinds of fees as with your present mortgage loan. These could include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Do the Math

Paying discount points can result in a lower interest rate. When you pay (on average) three percent of the mortgage loan amount up front, your savings for the life of the refinanced mortgage can be great. You might have heard that these points can be tax deductible, but as tax regulations can be difficult to keep up with, please consult a tax professional before depending on this.

Another thing about taxes is that when you reduce your interest rate, it follows that you will also be lowering the interest amount that you'll be able to deduct on your federal income taxes. This is one more cost that some borrowers take into consideration. We can help you do the math! Call us at (800) 974-0509.

All things considered, for most people the amount of initial costs to refinance are paid back soon in monthly savings. We can help you find out what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your money on hand. Call us at (800) 974-0509 to get you started.

Curious about refinancing your home? Call us at (800) 974-0509.