Is Refinancing Worth the Cost?

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Have you ever heard the pearl of wisdom that says you should only refinance if your new interest rate will be at least two points below your existing one? Perhaps that was sound advice a number of years ago, but since refinance costs have been falling recently, it could be a good time to take a serious look. A refinanced mortgage may be worth its cost several times over, considering the advantages that may come, along with a reduced interest rate.

Advantages

You might be able to bring down your interest rate (sometimes by a lot) and reduce your mortgage payment amount with your refinanced mortgage. You may also be able to "cash out" a portion of the built-up equity in your home, which you will be able use to take care of higher interest debt, add on to your home, or finance a vacation. With lower interest rates, you might also be able to build your home equity more quickly by changing to a shorter-term loan.

Expenses and Fees

All of these advantages do come with some expense, though. When you refinance, you're paying for a lot of the same things you paid for at the time you got your current mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might consider paying points to receive a reduced interest rate. If you pay (on average) three percent of the mortgage loan amount at the start, the savings for the life of the new loan can be great. You may hear that the points may be deducted on your income taxes, but as tax regulations are ever-changing, we urge you to speak with your tax professional before considering this in your calculations.

Speaking of taxes, if you bring down your interest rate, it follows that you'll also be lowering the paid interest amount that you will be able to deduct on your taxes. This is one more cost that some borrowers take into account. We can help you do the math! Call us at 603-893-6616.

All things considered, for most the total of initial costs to refinance are paid back very quickly in monthly savings. We will help you determine what loan program is perfect for you, considering your cash on hand, how likely you are to sell your house in the near future, and how refinancing may effect your taxes. Call us at 603-893-6616 to get started.

Curious about refinancing your home? Call us at 603-893-6616.

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