Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that states you should only consider refinancing if your new interest rate is at least 2 points under your present one? Perhaps several years ago that was wise advice, but since refinance costs have been falling recently, it may be time to look into it. A refinanced loan is often worth its cost many times over, factoring in the benefits that come, as well as a lower interest rate.

Advantages of Refinancing

When you refinance, you may have the ability to reduce the interest rate and mortgage payment amount, sometimes considerably. Additionally, you may have the option of pulling out some of your home equity by "cashing out" some money to renovate your home, consolidate debt, or take your family on a vacation. With lower interest rates, you may also be able to build up home equity more quickly by changing to a shorter-term loan.

Expenses and Fees

All these benefits do come with some expense, though. You'll be charged the same kinds of expenses and fees as you did with your current home loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You might think about paying points to reduce your interest rate. The money you'll save on the life of the loan could be substantial if you've paid up front about three percent of the new loan total. You might hear that points can be tax deductible, but since tax regulations can be difficult to keep up with, we urge you to speak with a tax professional before depending on this.

One more cost that borrowers might take into account is that a lower rate of interest will reduce the interest amount you'll deduct on your federal income taxes. Call us at 3038627760 to help you do the math.

Most people find that the monthly savings balance out the up-front cost of refinancing. We will help you figure out which loan program is best for you, looking at your cash on hand, how likely you are to sell your house in the near future, and how refinancing will effect your taxes. Call us at 3038627760 to get you started.

Want to know more about refinancing? Give us a call at 3038627760.