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 mortgage. That may have been sound advice a while back, but with the fact that refinancing has been costing less over the last few years, it's a good time to consider a new loan! A refinanced loan may be worth its cost several times over, because of the benefits that it brings, as well as a reduced interest rate.

Advantages

When you refinance, you may be able to lower the interest rate and mortgage payment , perhaps considerably. You could also have the ability to "cash out" some of your home equity, which you will be able use to take care of higher interest debts, improve your home, or take a vacation. You may be able to refinance to a shorter-term mortgage program, enabling you to add to your home equity faster.

Fees and Expenses

All of these advantages do come with some expense, though. You'll be charged the same sort of expenses and fees as with your current mortgage loan. These may include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Do the Math

You might offer to pay points (prepaid interest) to get a lower rate of interest. The money you will save over the life of the mortgage could be substantial if you've paid up front about three percent of the new loan balance. You may have heard that points may be tax deductible, but since tax regulations are difficult to keep up with, please consult a tax professional before making any decisions based on this.

Speaking of taxes, if you bring down your interest rate, it follows that you will also be reducing the interest amount that you'll be able to deduct on your federal income taxes. This is one more cost that borrowers take into account. Call us at (334) 285-8850 to help you do the math.

Most people find that the savings per month outweigh the initial cost of refinancing. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at (334) 285-8850 to get you started.

Want to know more about refinancing? Call us at (334) 285-8850.

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