When is Refinancing Worth it?

Some have said that only if your new interest is at least two points under your current rate, should you refinance your mortgage. That may have been good advice a while back, but with refinancing dropping in cost recently, it is never the wrong time to think about a new mortgage loan! Refinancing has some advantages that will often make it worth the initial cost many times over.

Advantages

When you refinance, you may have the ability to reduce the interest rate and monthly mortgage payment amount, perhaps considerably. Additionally, you could have the option of tapping into your home equity by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. You could have the option to refinance to a shorter-term mortgage, giving you the ability to build your home equity faster.

The Cost

As you probably know, you will have to pay for your process of refinancing. With your refinance, you're paying for a lot of the same things you were charged for when you got your original mortgage loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

If you refinance your existing loan too quickly, you may have a penalty to pay. It all depends on your current loan agreement. However, the penalties may apply just to the initial couple of years of your mortgage loan. We'll help you sort through the details: contact us at (800) 763-7154 EXT 3.

Doing the Math

You might offer to pay discount points (prepaid interest) to gain a more favorable interest rate. The amount you'll save over the life of the mortgage loan could be substantial if you've paid up front about three percent of the new loan balance. You might hear that the points may be tax deductible, but because tax regulations are ever-changing, we urge you to speak with a tax professional before making decisions based on this.

Another thing about taxes is that if your interest rate is reduced, it follows that you'll also be reducing the interest amount that you may deduct on your taxes. This is another expense that borrowers consider. We can help you do the math! Call us at (800) 763-7154 EXT 3.

In the end, for most the amount of initial costs to refinance are made up very quickly in savings each month. We will help you figure out what mortgage loan program is right for you, taking into account your cash on hand, how likely you are to sell your house in the near future, and the effect refinancing could have on your taxes. Call us at (800) 763-7154 EXT 3 to get started.