Is Refinancing Worth the Cost?

Have you ever heard the pearl of wisdom that says you should only refinance if your new interest rate will be at least two points under your current rate? That might have been valid a while back, but with the fact that refinancing has been costing less recently, it's never the wrong time to consider a new loan! A refinance can be worth its cost several times over, factoring in the benefits that may come, as well as a lower interest rate.

Benefits

When you refinance, you might have the ability to reduce your interest rate and mortgage payment , sometimes considerably. Additionally, you might have the option of tapping into the equity in your property by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. You may have the option to refinance into a shorter-term mortgage loan, enabling you to build your equity faster.

Expenses and Fees

Of course, you will have some fees and expenses during the process of refinancing. You'll pay the same types of expenses and fees as with your current home loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

If you refinance your current mortgage too soon, you may have a penalty . This depends on the rules of your present loan. However, some of these penalties apply only to the initial couple of years of the mortgage. We will help you sort through the details: contact us at 800-805-7088.

Doing the Math

You might consider paying points to reduce your interest rate. The money you will save on the life of the mortgage loan might be substantial if you have paid up front about 3% of the new loan balance. We recommend that you consult a tax professional before acting on hear-say that the paid points may be deducted on your federal income taxes.

Another thing about taxes is that once you bring down your interest rate, naturally you'll also be reducing the paid interest amount that you will be able to deduct from your federal income taxes. This is one more expense that borrowers take into account. Call us at 800-805-7088 to help you do the math.

Most borrowers find that the savings each month quickly balance out the initial expenses of a refinance. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your cash on hand. Call us at 800-805-7088 to get you started.