Is Refinancing Worth the Cost?

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It has been said that only if your new interest is at least 2 points lower, should you refinance your mortgage. That may have been valid a while back, but since refinancing has been costing less recently, it's never the wrong time to consider a new mortgage loan! A refinance may be worth its cost many times over, factoring in the advantages that can come, in addition to a reduced interest rate.

Benefits from Refinancing

When you refinance, you could be able to reduce the interest rate and monthly mortgage payment amount, sometimes considerably. You may also have the ability to "cash out" a portion of the built-up equity in your home, that you are able use to consolidate debt, add on to your home, or finance a vacation. With lower interest rates, you may also be able to build your home equity more quickly by switching to a shorter-term mortgage loan.

Expenses and Fees

All these benefits do come with some expense, though. When you refinance, you are paying for basically the same things you paid for during your current mortgage. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

Paying discount points can help you get a lower interest rate. When you pay (on average) three percent of the mortgage loan amount initially, the savings for the term of the refinanced mortgage loan can be great. We recommend that you consult a tax professional before acting on advice that the paid points can be deducted on your federal income taxes.

Another cost that borrowers may consider is that a reduced rate of interest will lower the interest amount you'll be able to deduct from your taxes. Call us at 952 417 8481 to help you do the math.

In the end, for most people the total of up-front costs to refinance are paid back soon in savings each month. We can help you figure 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 available cash. Call us at 952 417 8481 to get started.

Curious about refinancing? Call us at 952 417 8481.

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