Is Refinancing Worth the Cost?

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Have you ever heard the pearl of wisdom that states you should only refinance if the new interest rate is at least two points lower than your existing rate? That might have been accurate a while back, but since refinancing has been costing less in recent years, it's a good time to think about a new loan! A refinanced mortgage is often worth its cost several times over, considering the benefits that it brings, along with a reduced interest rate.

Benefits from Refinancing

You may be able to bring down your interest rate (sometimes significantly) and reduce your mortgage payment amount with your refinanced mortgage loan. Additionally, you could be given 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. You might have the option to refinance into a shorter-term mortgage program, giving you the ability to build up your home equity faster.

Expenses and Fees

Of course, you will have some fees and expenses during the process of refinancing. You'll be charged the same sort of fees as you did with your present home loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

Paying discount points can get you a lower interest rate. Your savings over the life of the mortgage could be substantial if you've paid up front about 3% of the new loan balance. You might have heard that points may be tax deductible, but since tax regulations are ever-changing, please speak with a tax professional before considering this in your calculations.

Another thing about taxes is that if you bring down your interest rate, naturally you'll also be reducing the interest amount that you can deduct on your taxes. This is one more expense that some borrowers take into consideration. Call us at 602-647-2555 to help you do the math.

Most borrowers find that the savings each month quickly balance out the up-front expenses of a refinance. We'll help you determine what mortgage loan program is best for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and what effect refinancing will probably have on your taxes. Call us at 602-647-2555 to get you started.

Curious about refinancing your home? Call us: 602-647-2555.