When is Refinancing Worth it?

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Have you ever heard the pearl of wisdom that states you should only consider refinancing if your new interest rate is at least 2 points under your existing rate? Maybe that was good advice several years ago, but as refinance costs have been getting lower, it could be a good time to look into it. A refinance can be worth its cost several times over, factoring in the advantages that it brings, in addition to a reduced interest rate.


You might be able to lower your interest rate (sometimes significantly) and have smaller monthly payments with a refinanced mortgage loan. 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 take your family on a vacation. With reduced interest rates, you may also get the chance to build up home equity faster by moving to a shorter-term mortgage loan.

The Cost

As you probably expect, you'll 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 during your original mortgage. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You might look into paying points to reduce your interest rate. When you pay (on average) three percent of the loan amount up front, the savings for the life of the new mortgage loan can be substantial. We recommend that you talk to a tax professional before acting on rumors that the points paid may be deducted on your federal income taxes.

Speaking of taxes, once you reduce your interest rate, of course you'll also be reducing the paid interest amount that you'll be able to deduct from your federal income taxes. This is one more expense that borrowers consider. Call us at 6233400934 to help you do the math.

In the end, for most borrowers the amount of up-front costs to refinance are paid back very quickly in monthly savings. We can help you find out what your options are, 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 cash on hand. Call us at 6233400934 to get you started.

Want to know more about refinancing your home? Give us a call: 6233400934.

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