When is Refinancing Worth it?

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Ever heard the old rule of thumb that says you should only refinance if your new interest rate will be at least 2 points under your existing one? Perhaps several years ago that was sage advice, but as refinance costs have been getting lower, it could be a good time to look into it. Refinancing has a variety of benefits that often make it worth the initial expenditure several times over.

Benefits

When you refinance, you might be able to lower your interest rate and monthly mortgage payment amount, perhaps significantly. You might also be able to "cash out" some of your home equity, which you will be able use to consolidate debt, improve your home, or take a vacation. With reduced rates, you might also get the chance to build your home equity more quickly by switching to a shorter-term mortgage.

Fees and Expenses

As you probably expect, you'll have to pay for your process of refinancing. With your refinance, you are paying for most of the same things you were charged for during your current mortgage. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

Paying points can help you attain 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 can be substantial. We recommend that you consult with a tax professional before acting on advice that any paid points can be deducted on your taxes.

Speaking of taxes, when your interest rate is reduced, of course you'll also be lowering the interest amount that you may deduct from your taxes. This is another cost that some borrowers take into consideration. Call us at (972) 292-0448 to help you do the math.

Most borrowers find that the monthly savings outweigh the initial expenses of refinancing. We can help you explore your options, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at (972) 292-0448 to get you started.

Curious about refinancing? Give us a call: (972) 292-0448.

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