When is Refinancing Worth it?

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Ever hear the pearl of wisdom that states you should only refinance if your new interest rate is at least 2 points under your existing one? Perhaps several years ago that was sage advice, but as refinance costs have been falling recently, it may be a good time to look into it. A refinance is often worth its cost many times over, considering the advantages that it brings, in addition to a reduced interest rate.

Advantages of Refinancing

When you refinance, you may have the ability to lower the interest rate and mortgage payment , perhaps by a lot. Additionally, you could have the option of tapping into your home equity by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also get the chance to build up home equity faster by changing to a shorter term mortgage loan.

Expenses and Fees

As you probably expect, you'll have some fees and expenses during your process of refinancing. You will have to pay the same sort of expenses and fees as with your existing mortgage loan. These probably include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Doing the Math

Paying points can result in a lower interest rate. When you pay (on average) three percent of the mortgage loan amount initially, the savings for the term of the refinanced mortgage loan can be substantial. We recommend that you consult a tax professional before acting on hear-say that these points paid can be deducted on your federal income taxes.

Another thing about taxes is that if you lower your interest rate, it follows that you'll also be reducing the interest amount that you'll be able to deduct from your taxes. This is one more expense that some borrowers take into consideration. We can help you do the math! Call us at 877-310-6200.

All things considered, for most the total of initial costs to refinance will be made up soon in savings each month. We can help you figure out your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at 877-310-6200 to get you started.

Curious about refinancing your home? Call us: 877-310-6200.

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