Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that states you should only refinance if the new interest rate is at least two points below your current rate? That may have been good advice a while back, but since refinancing has been costing less recently, it is never the wrong time to think about a new mortgage loan! Refinancing has a number of benefits that can make it worth the up-front cost several times over.

Benefits

When you refinance, you might have the ability to reduce the interest rate and mortgage payment amount, perhaps considerably. You could also have the option to "cash out" a portion of your equity, that you are able use to take care of higher interest debts, improve your home, or finance a vacation. With reduced interest rates, you might also be able to build up home equity faster by moving to a shorter term loan.

The Cost

Of course, you will have some fees and expenses during your process of refinancing. You'll pay the same sort of expenses and fees as you did with your existing home loan. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Do the Math

You could offer to pay discount points (prepaid interest) to attain a lower interest rate. If you pay (on average) 3% of the loan amount at the start, your savings for the life of the new mortgage can be substantial. Please talk to a tax professional before acting on advice that the points paid can be deducted on your taxes.

One more expense that borrowers might take into account is that a reduced rate of interest will reduce the interest amount you will be able to deduct on your taxes. Call us at 4787462063 to help you do the math.

Ultimately, for most the total of up-front costs to refinance are made up soon in monthly savings. We'll help you find out which mortgage loan program is ideal for you, taking into account your cash on hand, the likelihood of selling your residence in the near future, and the effect refinancing will have on your taxes. Call us at 4787462063 to get started.

Curious about refinancing? Give us a call: 4787462063.

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