Is Refinancing Worth the Cost?

Picture of a mortgage contract

Ever heard the old rule of thumb that states you should only refinance if the new interest rate will be at least 2 points under your current rate? That may have been accurate a while back, but with the fact that refinancing has been costing less in recent years, it is a good time to think about a new mortgage loan! Refinancing has a variety of benefits that often make it worth the up-front expenditure a few times over.

Benefits from Refinancing

When you refinance, you might be able to lower the interest rate and mortgage payment , perhaps considerably. You also could have the option of tapping into the equity in your property by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. With lower rates, you might also be able to build up home equity more quickly by moving to a shorter term loan.

The Cost

As you probably know, you will have to pay for your process of refinancing. When you refinance, you're paying for basically the same things you paid for when you obtained your existing mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might look into paying points to reduce your interest rate. The amount you'll save over the life of the loan could be significant if you have paid up front about 3% of the new loan total. Please consult with a tax professional before acting on advice that the points paid can be deducted on your federal income taxes.

Speaking of taxes, when your interest rate is reduced, naturally you'll also be reducing the interest amount that you may deduct from your federal income taxes. This is one more cost that some borrowers take into account. Call us at (407) 898-7559 to help you do the math.

Most borrowers find that the monthly savings outweigh the initial cost of refinancing. We will work with you to figure out which mortgage loan program is the right fit for you, considering your cash on hand, how likely you are to sell your home in the next few years, and the effect refinancing might have on your taxes. Call us at (407) 898-7559 to get started.

Curious about refinancing? Give us a call: (407) 898-7559.


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