Is Refinancing Worth the Cost?

It has been said that only in the case your new interest is at least two points lower, should you refinance your mortgage. That might have been true years ago, but as refinancing has been costing less recently, it is a good time to think about a new mortgage! Refinancing has a number of advantages that can make it worth the initial cost many times over.

Benefits from Refinancing

When you refinance, you may be able to lower the interest rate and monthly payment amount, sometimes by a lot. You could also have the option to "cash out" some of the built-up equity in your home, that you are able use to consolidate debts, add on to your home, or finance a vacation. You may be able to refinance to a shorter-term mortgage loan, enabling you to build your equity quicker.

The Cost

As you probably know, you will have to pay for your process of refinancing. When you refinance, you're paying for basically the same things you were charged for when you got your existing mortgage loan. These may include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

If you refinance your present mortgage too quickly, you might have a penalty to pay. It depends on the terms of your existing mortgage. Some of these penalties apply only to the first year or two. We'll help you with the details: contact us at 877-696-4687.

Do the Math

You could need to pay points (prepaid interest) to attain a lower interest rate. If you pay (on average) 3% of the loan amount at the start, the savings for the term of the refinanced mortgage can be significant. We recommend that you consult a tax professional before acting on hear-say that these points paid may be deducted on your federal income taxes.

Another thing about taxes is that if your interest rate is lowered, of course you will also be lowering the paid interest amount that you'll be able to deduct from your taxes. This is one more expense that borrowers consider. Call us at 877-696-4687 to help you do the math.

In the end, for most borrowers the amount of initial costs to refinance are paid back soon in savings each month. We'll help you figure out what mortgage program is best for you, considering your cash on hand, how likely you are to sell your house in the next few years, and the effect refinancing could have on your taxes. Call us at 877-696-4687 to get you started.