Is Refinancing Worth the Cost?

It has been said that only in the case your new interest is at least 2 points below your current rate, should you refinance your mortgage. Maybe that was good advice a number of years ago, but since refinance costs have been getting lower, it may be a good time to look into it. Refinancing has a variety of advantages that often make it worth the up-front cost many times over.

Advantages

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

Fees and Expenses

Of course, you'll have to pay for the process of refinancing. You'll have to pay the same kinds of expenses and fees as you did with your existing mortgage. These might include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

You could have to make a penalty payment for refinancing your present mortgage loan too quickly. It all depends on your existing loan contract. However, some of these penalties apply only to the initial several years of your loan. We'll help you sort through the details: contact us at 9013595912.

Doing the Math

You might consider paying points to reduce your interest rate. If you pay (on average) three percent of the mortgage loan amount at the start, your savings for the term of the new mortgage loan can be significant. We recommend that you talk to a tax professional before acting on rumors that any points paid may be deducted on your federal income taxes.

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 taxes. This is another cost that some borrowers take into consideration. Call us at 9013595912 to help you do the math.

Most people find that the monthly savings quickly outweigh the up-front cost of refinancing. We can help you figure out your options, considering the effect a refinance may have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 9013595912 to get started.