Is Refinancing Worth the Cost?

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Ever hear the pearl of wisdom that states you should only refinance if your new interest rate will be at least 2 points under your present rate? That may have been true a while back, but with refinancing dropping in cost recently, it is never the wrong time to think about a new mortgage! A refinanced mortgage is often worth its cost several times over, because of the benefits that come, as well as a reduced interest rate.

Advantages of Refinancing

You might be able to lower your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with a refinanced mortgage loan. You also might be given the option of tapping into your home equity by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. You might be able to refinance into a shorter-term mortgage, enabling you to build your equity quicker.

Expenses and Fees

All these benefits do cost something, though. You'll be charged the same types of fees as you did with your existing mortgage loan. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Doing the Math

You could offer to pay points (prepaid interest) to attain a lower rate of interest. If you pay (on average) 3% of the mortgage loan amount at the start, your savings for the life of the refinanced mortgage loan can be substantial. You may have heard that points may be deducted on your income taxes, but because tax regulations are ever-changing, we urge you to consult a tax professional before making decisions based on this.

Another thing about taxes is that once you lower your interest rate, of course you will also be reducing the paid interest amount that you may deduct from your taxes. This is another expense that some borrowers consider. Call us at (281) 778-0805 to help you do the math.

Ultimately, for most the amount of up-front costs to refinance are made up very quickly in monthly savings. We will work with you to find out which mortgage loan program is perfect for you, looking at your cash on hand, how likely you are to sell your home in the near future, and how refinancing can effect your taxes. Call us at (281) 778-0805 to get started.

Want to know more about refinancing your home? Give us a call: (281) 778-0805.

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