Is Refinancing Worth the Cost?

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Have you ever heard the old rule of thumb that says you should only refinance if the new interest rate is at least two points lower than your existing one? That could have been valid a while back, but with refinancing dropping in cost recently, it's a good time to think about a new mortgage! Refinancing your mortgage loan has various benefits that can make it worth the up-front cost several times over.

Benefits from Refinancing

When you refinance, you may be able to reduce the interest rate and monthly payment amount, sometimes by a lot. Additionally, you may be given the option of pulling out some of the equity in your property by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also be able to build up home equity more quickly by switching to a shorter term mortgage.

The Cost

All of these benefits do come with some expense, though. When you refinance, you're paying for many of the same things you were charged for when you got your current mortgage loan. Included in the list 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. If you pay (on average) 3% of the mortgage loan amount initially, your savings for the life of the new loan can be great. You might be told that points may be deducted on your income taxes, but as tax regulations can be ever-changing, please speak with your tax professional before making decisions based on this.

Speaking of taxes, if you reduce your interest rate, naturally you'll also be reducing the paid interest amount that you may deduct on your taxes. This is another cost that some borrowers take into account. We can help you do the math! Call us at (334) 285-8850.

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

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

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