Is Refinancing Worth the Cost?

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Have you ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least two points below your present one? Maybe several years ago that was wise advice, but since refinance costs have been falling recently, it could be time to look into it. A refinanced mortgage loan may be worth its cost many times over, factoring in the benefits that it brings, as well as a lower interest rate.

Advantages

You may be able to lower your interest rate (sometimes substantially) and reduce your mortgage payment amount with a refinanced loan. You could also have the option to "cash out" some of your equity, that you will be able use to take care of higher interest debts, make home improvements, or take a vacation. With lower interest rates, you might also be able to build up home equity faster by switching to a shorter term loan.

Expenses and Fees

All these benefits do cost something, though. You'll have the same sort of fees as with your existing mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

Paying discount points can get you a better interest rate. If you pay (on average) three percent of the loan amount initially, your savings for the term of the new mortgage can be significant. We recommend that you consult with a tax professional before acting on rumors that these points paid can be deducted on your taxes.

Another thing about taxes is that once your interest rate is reduced, naturally you will also be lowering the interest amount that you can deduct from your federal income taxes. This is one more cost that borrowers consider. We can help you do the math! Call us at 952 417 8481.

Most borrowers find that the monthly savings outweigh the initial expenses of refinancing. We can help you find out your options, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your cash on hand. Call us at 952 417 8481 to get started.

Want to know more about refinancing? Give us a call: 952 417 8481.

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