Is Refinancing Worth the Cost?

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Ever heard the pearl of wisdom that says you should only consider refinancing if your new interest rate will be at least two points under your current one? That could have been valid years ago, but with refinancing dropping in cost in recent years, it is a good time to consider a new loan! Refinancing has some benefits that often make it worth the initial expenditure many times over.

Benefits

When you refinance, you might have the ability to reduce your interest rate and mortgage payment , perhaps by a lot. You may also have the option to "cash out" a portion of the built-up equity in your home, that you may use to consolidate debt, make home improvements, or take a vacation. You could have the option to refinance into a shorter-term mortgage program, giving you the ability to build your equity quicker.

Expenses and Fees

As you probably expect, you will have to pay for the the refinance process. When you refinance, you're paying for basically the same things you paid for during your original mortgage. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might offer to pay points (prepaid interest) to gain a better rate of interest. The money you will save over the life of the loan may be significant if you have paid up front about three percent of the new loan balance. You might be told that the points may be tax deductible, but because tax regulations can be ever-changing, we urge you to consult your tax professional before depending on this.

Another thing about taxes is that if you lower your interest rate, naturally you'll also be reducing the interest amount that you'll be able to deduct on your taxes. This is another cost that borrowers consider. Call us at (301) 773-9811 to help you do the math.

Most people find that the monthly savings quickly balance out the up-front expenses of refinancing. We can help you explore what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the near future, and your money on hand. Call us at (301) 773-9811 to get started.

Curious about refinancing? Give us a call: (301) 773-9811.

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