Is Refinancing Worth the Cost?

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Have you ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate will be at least 2 points below your present rate? That may have been accurate a while back, but with refinancing dropping in cost recently, it's never the wrong time to think about a new mortgage! Refinancing has a number of benefits that will often make it worth the up-front cost a few times over.


When you refinance, you might have the ability to lower the interest rate and monthly mortgage payment amount, perhaps significantly. You may also be able to "cash out" some of your home equity, which you are able use to take care of higher interest debt, make home improvements, or plan a vacation. With lower interest rates, you might also get the chance to build up home equity more quickly by changing to a shorter-term mortgage.

Fees and Expenses

All of these benefits do cost something, though. With your refinance, you're paying for basically the same things you were charged for during your current mortgage loan. These could include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Do the Math

You could need to pay discount points (prepaid interest) to attain a better interest rate. If you pay (on average) 3% of the mortgage loan amount up front, your savings for the life of the new mortgage loan can be significant. Please talk to a tax professional before acting on advice that these points paid may be deducted on your taxes.

An additional cost that a borrower may take into account is that a reduced rate of interest will lower the interest amount you will deduct on your federal income taxes. We can help you do the math! Call us at 6233400934.

In the end, for most people the total of up-front costs to refinance are made up very quickly in savings each month. We can help you find out your options, considering the effect a refinance may have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at 6233400934 to get you started.

Want to know more about refinancing? Call us: 6233400934.

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