Is Refinancing Worth the Cost?

Ever hear the old rule of thumb that says you should only consider refinancing if your new interest rate will be at least 2 points below your existing one? That may have been true years ago, but with refinancing dropping in cost in recent years, it's never the wrong time to consider a new mortgage! A refinance can be worth its cost several times over, considering the benefits that it brings, along with a reduced interest rate.

Advantages

When you refinance, you might be able to reduce the interest rate and mortgage payment amount, sometimes significantly. You also may be given the option of tapping into the equity in your property by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. With reduced rates, you might also be able to build your home equity more quickly by switching to a shorter term mortgage loan.

The Cost

All these advantages do come with some expense, though. With your refinance, you're paying for most of the same things you were charged for during your current mortgage loan. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

When you refinance your current loan too soon, you might have a penalty to pay. That depends on the terms of your present mortgage. However, the penalties may apply just to the initial few years of your mortgage loan. We will help you figure it out: contact us at 866-300-1550.

Doing the Math

You might investigate paying points to get a reduced interest rate. If you pay (on average) three percent of the mortgage loan amount up front, the savings for the term of the refinanced loan can be substantial. You might be told that points can be deducted on your income taxes, but because tax regulations are ever-changing, please consult with your tax professional before depending on this.

Speaking of taxes, if you bring down your interest rate, of course you'll also be lowering the paid interest amount that you'll be able to deduct on your taxes. This is another cost that borrowers take into account. Call us at 866-300-1550 to help you do the math.

Ultimately, for most people the total of initial costs to refinance are made up soon in savings each month. We'll work with you to figure out what mortgage loan program is the ideal fit for you, taking into account your cash on hand, how likely you are to sell your home in the near future, and how refinancing will effect your taxes. Call us at 866-300-1550 to get you started.