When is Refinancing Worth it?

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Ever hear the pearl of wisdom that states you should only refinance if the new interest rate will be at least two points under your current one? Perhaps several years ago that was good advice, but as refinance costs have been getting lower, it could be a good time to take a serious look. A refinance is often worth its cost many times over, because of the advantages that it brings, as well as a reduced interest rate.

Advantages

When you refinance, you may have the ability to lower your interest rate and mortgage payment amount, perhaps by a lot. You also might be given the option of pulling out some of the equity in your house by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. You could be able to refinance to a shorter-term mortgage loan, giving you the ability to add to your equity faster.

Expenses and Fees

All these advantages do come with some expense, though. With your refinance, you are paying for basically the same things you were charged for during your original mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might look into paying points to receive a lower interest rate. Your savings over the life of the loan might be substantial if you have paid up front about 3% of the new loan total. You may be told that points may be tax deductible, but as tax regulations are ever-changing, we urge you to consult a tax professional before considering this in your calculations.

One more expense that borrowers might consider is that a lower interest rate will lower the interest amount you'll deduct on your taxes. Call us at (334) 285-8850 to help you do the math.

Most borrowers find that the savings per month balance out the up-front cost of refinancing. We can help you find out what your options are, considering the effect a refinance could have on your taxes, how likely you might be to sell in the next couple of years, and your cash on hand. Call us at (334) 285-8850 to get you started.

Curious about refinancing your home? Call us at (334) 285-8850.

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