Is Refinancing Worth the Cost?

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Some have said that only when your new interest will be at least two points lower, should you refinance your loan. Perhaps several years ago that was wise advice, but as refinance costs have been falling recently, it could be a good time to look into it. Refinancing has a variety of advantages that will often make it worth the initial expenditure several times over.

Advantages

You might be able to lower your interest rate (sometimes by a lot) and reduce your mortgage payment amount with your refinanced loan. Additionally, you might be given the option of pulling out some of the equity in your house by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. You might have the option to refinance into a shorter-term mortgage, enabling you to build up your equity faster.

The Cost

As you probably expect, you will have some fees and expenses during your process of refinancing. With your refinance, you're paying for many of the same things you paid for when you obtained your current mortgage loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

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 mortgage loan amount up front, your savings for the life of the refinanced mortgage loan can be substantial. You might be told that these points may be deducted on your income taxes, but because tax regulations are ever-changing, please speak with a tax professional before depending on this.

Another thing about taxes is that once your interest rate is reduced, it follows that you'll also be reducing the interest amount that you may deduct on your taxes. This is one more expense that some borrowers consider. Call us at 2603382561 to help you do the math.

Most borrowers find that the savings per month quickly outweigh the up-front expenses of a refinance. We will help you determine which mortgage loan program is the right fit for you, considering your cash on hand, how likely you are to sell your home in the near future, and what effect refinancing will probably have on your taxes. Call us at 2603382561 to get started.

Curious about refinancing your home? Give us a call: 2603382561.

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