Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that says you should only refinance if the new interest rate is at least two points lower than your current one? That could have been true years ago, but with refinancing dropping in cost recently, it's a good time to think about a new mortgage loan! A refinance can be worth its cost several times over, considering the benefits that come, along with a reduced interest rate.

Benefits from Refinancing

When you refinance, you might have the ability to lower your interest rate and mortgage payment amount, sometimes considerably. You might also have the ability to "cash out" a portion of the built-up equity in your home, that you are able use to take care of higher interest debts, make home improvements, or finance a vacation. You might be able to refinance into a shorter-term mortgage program, giving you the ability to add to your home equity quicker.

Expenses and Fees

All of these benefits do cost something, though. With your refinance, you're paying for many of the same things you were charged for during your existing mortgage. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might think about paying points to get a better interest rate. When you pay (on average) 3% of the mortgage loan amount initially, the savings for the term of the refinanced mortgage loan can be significant. You may have heard that points can be deducted on your income taxes, but as tax regulations are ever-changing, please consult with your tax professional before making any decisions based on this.

An additional cost that a borrower might 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 (440) 234-9660 to help you do the math.

In the end, for most the total of up-front costs to refinance are paid back very quickly in monthly savings. We'll help you find out what mortgage loan program is the right fit 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 (440) 234-9660 to get started.

Want to know more about refinancing your home? Give us a call: (440) 234-9660.

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