Is Refinancing Worth the Cost?

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Have you ever heard the old rule of thumb that states you should only consider refinancing if your new interest rate is at least two points under your present rate? Perhaps several years ago that was sage advice, but as refinance costs have been falling recently, it may be time to take a serious look. Refinancing has a number of advantages that can make it worth the initial cost several times over.

Advantages

You might be able to bring down your interest rate (sometimes substantially) and make smaller monthly payments with your refinanced mortgage. Additionally, you may have the option of pulling out some of the equity in your property by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. You may be able to refinance to a shorter-term mortgage, enabling you to add to your home equity quicker.

Fees and Expenses

All of these benefits do cost something, though. With your refinance, you're paying for a lot of the same things you paid for at the time you got your existing mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You could need to pay points (prepaid interest) to gain a lower rate of interest. The money you will save over the life of the loan might be significant if you've paid up front about 3% of the new loan total. We recommend that you consult a tax professional before acting on advice that the paid points may be deducted on your federal income taxes.

Speaking of taxes, if your interest rate is reduced, 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. We can help you do the math! Call us at 7133252099.

In the end, for most people the amount of initial costs to refinance are made up very quickly in savings each month. We'll help you determine what mortgage program is perfect for you, looking at your cash on hand, how likely you are to sell your house in the near future, and how refinancing can effect your taxes. Call us at 7133252099 to get started.

Want to know more about refinancing? Give us a call: 7133252099.

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