Is Refinancing Worth the Cost?

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Ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate will be at least 2 points lower than your existing rate? That could have been true years ago, but with refinancing dropping in cost over the last few years, it's a good time to explore the options of a new loan! A refinanced loan is often worth its cost several times over, factoring in the benefits that it brings, along with a reduced interest rate.


When you refinance, you might have the ability to lower the interest rate and mortgage payment amount, sometimes by a lot. You could also have the option to "cash out" some of your equity, that you are able use to consolidate debts, make home improvements, or take a vacation. You could have the option to refinance into a shorter-term mortgage program, enabling you to build up your home equity faster.

Fees and Expenses

All of these benefits do come with some expense, though. When you refinance, you're paying for basically the same things you paid for during your original mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Do the Math

You might consider paying points to reduce your interest rate. Your savings over the life of the mortgage loan may be substantial if you've paid up front about three percent of the new loan balance. You may have heard that the points may be deducted on your income taxes, but as tax regulations are ever-changing, we urge you to consult a tax professional before considering this in your calculations.

An additional cost that a borrower might consider is that a lower rate of interest will lower the interest amount you'll be able to deduct on your taxes. Call us at (334) 285-8850 to help you do the math.

Ultimately, for most people the total of up-front costs to refinance are paid back soon in monthly savings. We can help you find out your options, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the near future, and your money on hand. Call us at (334) 285-8850 to get you started.

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

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