When is Refinancing Worth it?

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It has been said that only when your new interest is at least 2 points lower, should you refinance your mortgage. Perhaps that was good advice several years ago, but since refinance costs have been getting lower, it may be a good time to take a serious look. A refinance is often worth its cost several times over, considering the benefits that it brings, along with a lower interest rate.

Advantages

You might be able to bring down your interest rate (sometimes substantially) and have smaller mortgage payments with a refinanced mortgage. You also might be given the option of pulling out some of your home equity by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. You could be able to refinance to a shorter-term mortgage loan, giving you the ability to add to your home equity quicker.

The Cost

All of these benefits do come with some expense, though. When you refinance, you're paying for basically the same things you were charged for during your current mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

Paying points can get you a lower interest rate. When 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 great. You may hear that these points can be tax deductible, but as tax regulations can be difficult to keep up with, we urge you to speak with a tax professional before considering this in your calculations.

An additional expense that borrowers may consider is that a reduced interest rate will reduce the interest amount you will deduct on your taxes. Call us at 623-340-0934 to help you do the math.

Ultimately, for most borrowers the amount of initial costs to refinance will be paid back very quickly in monthly savings. We can help you explore what your options are, considering the effect a refinance could have on your taxes, how likely you may be to sell in the next couple of years, and your money on hand. Call us at 623-340-0934 to get started.

Want to know more about refinancing your home? Give us a call at 623-340-0934.

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