Is Refinancing Worth the Cost?

Ever hear the pearl of wisdom that says you should only refinance if the new interest rate is at least two points lower than your present rate? Maybe that was sound advice several years ago, but since refinance costs have been getting lower, it could be time to look into it. Refinancing your mortgage loan has various benefits that will often make it worth the up-front expenditure a few times over.

Advantages

You may be able to bring down your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with a refinanced mortgage. You also might be given the option of tapping into your home equity by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. You could have the option to refinance to a shorter-term mortgage loan, giving you the ability to build your home equity quicker.

Fees and Expenses

Of course, you'll have to pay for the process of refinancing. You'll have the same kinds of expenses and fees as you did with your present home loan. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

You may be required to pay a penalty for refinancing your current loan too soon. That depends on the terms of your current mortgage. However, this kind of penalty may apply only to the initial several years of your mortgage. We will help you sort through the details: contact us at 502-491-0749.

Do the Math

You might look into paying points to receive a better interest rate. The amount you'll save over the life of the mortgage might be substantial if you've paid up front about 3% of the new loan total. You may hear that these points may be tax deductible, but as tax regulations are difficult to keep up with, please consult your tax professional before considering this in your calculations.

Another thing about taxes is that when you reduce your interest rate, it follows that you will also be reducing the interest amount that you'll be able to deduct on your federal income taxes. This is one more expense that borrowers take into consideration. Call us at 502-491-0749 to help you do the math.

Ultimately, for most borrowers the amount of up-front costs to refinance are made up very quickly in monthly savings. We will help you determine what mortgage program is perfect for you, considering your cash on hand, the likelihood of selling your house in the next few years, and how refinancing can effect your taxes. Call us at 502-491-0749 to get you started.