When is Refinancing Worth it?

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Have you ever heard the old rule of thumb that states you should only consider refinancing if your new interest rate is at least two points below your current one? Perhaps that was good advice several years ago, but as refinance costs have been getting lower, it may be time to look into it. A refinance is often worth its cost several times over, factoring in the benefits that it brings, as well as a lower interest rate.


You could be able to lower your interest rate (sometimes substantially) and reduce your mortgage payment amount with a refinanced mortgage. You may also have the ability to "cash out" a portion of your equity, which you are able use to take care of higher interest debts, improve your home, or finance a vacation. With lower rates, you might also get the chance to build your home equity more quickly by changing to a shorter term loan.

Fees and Expenses

Of course, you'll have some fees and expenses during your the refinance process. When you refinance, you are paying for basically the same things you paid for during your current mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might need to pay points (prepaid interest) to attain a lower interest rate. The money you'll save over the life of the mortgage could be substantial if you have paid up front about three percent of the new loan total. We recommend that you talk to a tax professional before acting on rumors that the paid points can be deducted on your taxes.

Speaking of taxes, when your interest rate is reduced, of course you'll also be reducing the paid interest amount that you can deduct from your taxes. This is one more cost that some borrowers take into consideration. Call us at 4078987559 to help you do the math.

Most borrowers find that the savings each month balance out the initial cost of a refinance. We can help you explore your options, considering the effect a refinance could have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at 4078987559 to get started.

Curious about refinancing? Call us: 4078987559.

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