Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that states you should only consider refinancing if the new interest rate is at least 2 points lower than your present one? That might have been accurate years ago, but with refinancing dropping in cost in recent years, it is never the wrong time to explore the options of a new mortgage loan! A refinance can be worth its cost many times over, factoring in the benefits that it brings, in addition to a reduced interest rate.

Advantages

When you refinance, you might be able to lower the interest rate and mortgage payment , perhaps by a lot. You might also have the ability to "cash out" some of the built-up equity in your home, that you will be able use to consolidate debt, add on to your home, or finance a vacation. With lower interest rates, you may also be able to build up home equity faster by moving to a shorter term loan.

The Cost

All of these advantages do come with some expense, though. You'll be charged the same sort of expenses and fees as you did with your current home loan. These can include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Doing the Math

You could need to pay points (prepaid interest) to gain a more favorable rate of interest. If you pay (on average) three percent of the loan amount at the start, your savings for the term of the new mortgage loan can be great. Please consult a tax professional before acting on advice that any paid points may be deducted on your taxes.

Another thing about taxes is that if you bring down your interest rate, naturally you'll also be reducing the interest amount that you may deduct from your federal income taxes. This is one more expense that some borrowers take into account. Call us at 3038627760 to help you do the math.

All things considered, for most people the total of initial costs to refinance will be made up soon in savings each month. We can help you find out your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at 3038627760 to get started.

Want to know more about refinancing your home? Give us a call: 3038627760.