Is Refinancing Worth the Cost?

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It has been said that only if your new interest will be at least 2 points below your current rate, should you refinance your mortgage. That could have been true a while back, but with refinancing dropping in cost in recent years, it's never the wrong time to explore the options of a new loan! Refinancing your mortgage loan has some benefits that will often make it worth the initial expenditure many times over.

Benefits from Refinancing

When you refinance, you might be able to reduce the interest rate and monthly mortgage payment amount, sometimes considerably. You might also be able to "cash out" a portion of your home equity, which you will be able use to consolidate debt, add on to your home, or take a vacation. You could be able to refinance into a shorter-term mortgage program, enabling you to build up your equity quicker.

Expenses and Fees

All these advantages do cost something, though. When you refinance, you're paying for most of the same things you were charged for during your current mortgage loan. These can include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Do the Math

You might offer to pay points (prepaid interest) to gain a more favorable rate of interest. If you pay (on average) 3% of the loan amount at the start, the savings for the life of the refinanced mortgage can be significant. You may have heard that the points can be deducted on your income taxes, but as tax regulations are ever-changing, we urge you to consult with your tax professional before depending on this.

An additional cost that borrowers might consider is that a reduced rate of interest will reduce the interest amount you'll deduct on your taxes. We can help you do the math! Call us at 305-800-3863.

Most people find that the savings per month balance out the up-front cost of a refinance. We can help you explore what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the next couple of years, and your cash on hand. Call us at 305-800-3863 to get started.

Want to know more about refinancing? Give us a call at 305-800-3863.

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