Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that says you should only refinance if your new interest rate will be at least 2 points under your current one? Perhaps several years ago that was wise advice, but as refinance costs have been falling recently, it may be a good time to take a serious look. Refinancing has a number of advantages that often make it worth the initial expenditure several times over.

Advantages

You may be able to lower your interest rate (sometimes significantly) and make smaller monthly payments with your refinanced mortgage loan. You may also have the ability to "cash out" a portion of your home equity, which you will be able use to consolidate debt, improve your home, or take a vacation. With lower interest rates, you might also get the chance to build up home equity more quickly by switching to a shorter-term mortgage loan.

Fees and Expenses

All these advantages do come with some expense, though. You'll have to pay the same types of fees as with your existing home loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might look into paying points to reduce your interest rate. Your savings over the life of the loan might be significant if you've paid up front about 3% of the new loan total. You may be told that points can be tax deductible, but because tax regulations can be difficult to keep up with, please speak with a tax professional before making decisions based on this.

An additional expense that a borrower may consider is that a lower interest rate will lower the interest amount you will be able to deduct from your taxes. Call us at 214-865-7442 to help you do the math.

Most people find that the savings each month quickly outweigh the up-front expenses of a refinance. We will help you figure out which mortgage loan program is ideal for you, taking into account your cash on hand, how likely you are to sell your home in the near future, and how refinancing will effect your taxes. Call us at 214-865-7442 to get you started.

Curious about refinancing? Give us a call: 214-865-7442.

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