Is Refinancing Worth the Cost?

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Have you ever heard the pearl of wisdom that says you should only refinance if the new interest rate will be at least two points under your current rate? That might have been good advice a while back, but with refinancing dropping in cost recently, it is a good time to think about a new mortgage loan! Refinancing has a variety of advantages that will often make it worth the initial cost a few times over.

Advantages

You might be able to lower your interest rate (sometimes by a lot) and reduce your mortgage payment amount with a refinanced mortgage. Additionally, you might be given the option of tapping into the equity in your home by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. You may be able to refinance into a shorter-term mortgage, enabling you to build your home equity quicker.

Fees and Expenses

All these benefits do come with some expense, though. You'll have to pay the same sort of expenses and fees as you did with your current mortgage. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Do the Math

You could offer to pay points (prepaid interest) to gain a lower interest rate. Your savings over the life of the loan could be significant if you have paid up front about three percent of the new loan balance. Please talk to a tax professional before acting on rumors that these points paid may be deducted on your federal income taxes.

Speaking of taxes, when you reduce your interest rate, of course you will also be reducing the paid interest amount that you'll be able to deduct from your taxes. This is one more expense that some borrowers consider. Call us at 8139881776 to help you do the math.

Most borrowers find that the monthly savings quickly outweigh the up-front expenses of refinancing. We'll help you figure out what loan program is best for you, taking into account your cash on hand, how likely you are to sell your house in the near future, and what effect refinancing will probably have on your taxes. Call us at 8139881776 to get started.

Curious about refinancing your home? Give us a call: 8139881776.

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