Is Refinancing Worth the Cost?

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Ever hear the pearl of wisdom that says you should only refinance if the new interest rate is at least 2 points lower than your current one? Maybe that was good advice several years ago, but since refinance costs have been getting lower, it may be time to look into it. Refinancing has some benefits that will often make it worth the up-front expenditure several times over.

Advantages of Refinancing

When you refinance, you may have the ability to reduce your interest rate and monthly mortgage payment amount, perhaps significantly. You also may be given the option of tapping into your home equity by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. You could be able to refinance to a shorter-term mortgage, giving you the ability to build your home equity quicker.

The Cost

Of course, you'll have some fees and expenses during the process of refinancing. You will pay the same kinds of fees as with your present mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might offer to pay discount points (prepaid interest) to gain a lower interest rate. The amount you will save over the life of the loan might be substantial if you have paid up front about 3% of the new loan balance. You might be told that points may be tax deductible, but since tax regulations are difficult to keep up with, we urge you to speak with a tax professional before making decisions based on this.

Another expense that borrowers may consider is that a lower rate of interest will reduce the interest amount you will deduct on your federal income taxes. Call us at (800) 974-0509 to help you do the math.

Most borrowers find that the monthly savings quickly balance out the up-front expenses of refinancing. We'll work with you to determine which mortgage loan program is the right fit for you, taking into account your cash on hand, the likelihood of selling your home in the near future, and how refinancing will effect your taxes. Call us at (800) 974-0509 to get started.

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