Is Refinancing Worth the Cost?

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Some have said that only when your new interest will be at least 2 points lower, should you refinance your loan. That might have been accurate a while back, but with refinancing dropping in cost recently, it is a good time to think about a new loan! Refinancing your mortgage has a variety of advantages that can make it worth the initial cost several times over.

Advantages

You may be able to bring down your interest rate (sometimes substantially) and have smaller monthly payments with a refinanced mortgage loan. You also could be given the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. You may be able to refinance into a shorter-term mortgage, giving you the ability to build your equity faster.

The Cost

All these advantages do cost something, though. When you refinance, you're paying for most of the same things you paid for during your existing mortgage loan. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Do the Math

You might need to pay points (prepaid interest) to attain a better rate of interest. If you pay (on average) 3% of the mortgage loan amount initially, the savings for the life of the refinanced mortgage can be significant. We recommend that you consult a tax professional before acting on advice that the points paid may be deducted on your taxes.

Another thing about taxes is that if your interest rate is reduced, it follows that you will also be lowering the interest amount that you will be able to deduct on your federal income taxes. This is one more cost that borrowers take into account. We can help you do the math! Call us at 719-331-6278.

Most people find that the monthly savings outweigh the up-front expenses of refinancing. We can help you explore what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at 719-331-6278 to get you started.

Want to know more about refinancing? Give us a call: 719-331-6278.

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