Is Refinancing Worth the Cost?

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It has been said that only if your new interest will be at least two points below your current rate, should you refinance your mortgage. Perhaps that was good advice a number of years ago, but since refinance costs have been falling recently, it could be time to look into it. A refinance can be worth its cost many times over, considering the advantages that can come, along with a reduced interest rate.

Advantages

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

The Cost

As you probably know, you will have to pay for your the refinance process. When you refinance, you are paying for basically the same things you paid for at the time you got your current mortgage loan. These might include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Do the Math

Paying discount points can help you get a better interest rate. The money you'll save on the life of the mortgage loan may be significant if you have paid up front about 3% of the new loan total. You may be told that these points can be tax deductible, but since tax regulations can be difficult to keep up with, please consult a tax professional before depending on this.

An additional expense that borrowers might take into account is that a reduced interest rate will lower the interest amount you'll be able to deduct on your taxes. Call us at (972) 292-0448 to help you do the math.

Most people find that the monthly savings outweigh the up-front cost of refinancing. We can help you explore what your options are, considering the effect a refinance could have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at (972) 292-0448 to get started.

Curious about refinancing your home? Give us a call at (972) 292-0448.

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