Is Refinancing Worth the Cost?

Some have said that only in the case your new interest is at least 2 points under your current rate, should you refinance your mortgage. Perhaps that was sound advice a number of years ago, but since refinance costs have been getting lower, it may be time to take a serious look. A refinanced mortgage is often worth its cost several times over, considering the advantages that it brings, in addition to a reduced interest rate.

Advantages of Refinancing

You might be able to lower your interest rate (sometimes by a lot) and have smaller mortgage payments with your refinanced loan. You also might have the option of tapping into your home equity by "cashing out" some money to renovate your home, consolidate debt, or take your family on a vacation. You may have the option to refinance into a shorter-term mortgage loan, enabling you to build your home equity faster.

Fees and Expenses

All of these advantages do cost something, though. You will have to pay the same kinds of fees as you did with your current mortgage loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

If you refinance your present mortgage too soon, you may have a penalty to pay. It all depends on your existing mortgage agreement. Some of the penalties just apply for the first year or two of the mortgage. We'll help you figure it out: contact us at 972.359.7766.

Doing the Math

You might look into paying points to reduce your interest rate. When you pay (on average) three percent of the loan amount initially, your savings for the term of the refinanced mortgage can be substantial. Please talk to a tax professional before acting on advice that these paid points may be deducted on your federal income taxes.

An additional expense that a borrower may take into account is that a reduced interest rate will lower the interest amount you will deduct on your federal income taxes. Call us at 972.359.7766 to help you do the math.

Most borrowers find that the monthly savings quickly outweigh the up-front expenses of refinancing. We can help you figure out your options, considering the effect a refinance could have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 972.359.7766 to get started.