Is Refinancing Worth the Cost?

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Some have said that only if your new interest will be at least two points lower, should you refinance your mortgage. Maybe that was good advice a number of years ago, but since refinance costs have been getting lower, it could be a good time to take a serious look. A refinanced loan can be worth its cost many times over, factoring in the benefits that it brings, along with a reduced interest rate.

Benefits

You might be able to lower your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with a refinanced mortgage loan. You may also be able to "cash out" a portion of your home equity, that you are able use to consolidate debt, add on to your home, or take a vacation. With reduced rates, you might also be able to build up home equity more quickly by switching to a shorter-term loan.

The Cost

As you probably expect, you'll have to pay for the the refinance process. When you refinance, you are paying for basically the same things you paid for during your existing mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might offer to pay points (prepaid interest) to gain a lower rate of interest. If you pay (on average) 3% of the loan amount up front, the savings for the life of the refinanced mortgage loan can be substantial. Please consult with a tax professional before acting on advice that these paid points can be deducted on your federal income taxes.

One more expense that a borrower may take into account is that a reduced interest rate will reduce the interest amount you will deduct from your federal income taxes. Call us at 954.920.9799 to help you do the math.

Most borrowers find that the savings per month quickly outweigh the initial cost of refinancing. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at 954.920.9799 to get started.

Curious about refinancing your home? Call us at 954.920.9799.

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