Is Refinancing Worth the Cost?

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Have you ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate will be at least 2 points under your existing one? That could have been valid a while back, but since refinancing has been costing less recently, it is a good time to consider a new mortgage loan! Refinancing has some advantages that can make it worth the initial expenditure several times over.

Benefits

You could be able to bring down your interest rate (sometimes by a lot) and reduce your mortgage payment amount with a refinanced mortgage. Additionally, you could be given the option of tapping into your home equity by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you may also be able to build up home equity more quickly by switching to a shorter term loan.

Fees and Expenses

As you probably know, you'll have some fees and expenses during your process of refinancing. You'll pay the same types of fees as with your current mortgage. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You could offer to pay discount points (prepaid interest) to get a more favorable interest rate. The money you'll save on the life of the mortgage could be significant if you have paid up front about 3% of the new loan total. You may have heard that points may be deducted on your income taxes, but because tax regulations can be ever-changing, we urge you to consult with your tax professional before making any decisions based on this.

Another thing about taxes is that when you bring down your interest rate, it follows that you'll also be reducing the paid interest amount that you'll be able to deduct from your taxes. This is one more expense that some borrowers take into consideration. Call us at (260) 338-2561 to help you do the math.

Most borrowers find that the monthly savings outweigh the initial cost of refinancing. We can help you find 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 available cash. Call us at (260) 338-2561 to get started.

Curious about refinancing your home? Call us: (260) 338-2561.

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