When is Refinancing Worth it?

It has been said that only when your new interest will be at least two points lower, should you refinance your loan. Maybe several years ago that was good advice, but as refinance costs have been getting lower, it may be time to take a serious look. Refinancing your mortgage has a number of advantages that will often make it worth the up-front cost a few times over.

Benefits from Refinancing

When you refinance, you may have the ability to reduce the interest rate and monthly payment , perhaps significantly. You also could have the option of tapping into your home equity by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. With lower rates, you might also be able to build up home equity faster by moving to a shorter-term loan.

Fees and Expenses

As you probably expect, you will have to pay for the process of refinancing. When you refinance, you're paying for most of the same things you paid for during your original mortgage. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

You could be required to pay a penalty for refinancing your current loan too quickly. That depends on the terms of your present mortgage loan. However, this type of penalty could apply only to the first couple of years of your mortgage. We'll help you figure it out: contact us at 915-691-9072.

Doing the Math

Paying points can result in a lower interest rate. Your savings over the life of the loan could be significant if you have paid up front about 3% of the new loan balance. We recommend that you talk to a tax professional before acting on rumors that the paid points may be deducted on your federal income taxes.

An additional expense that borrowers might consider is that a lower rate of interest will reduce the interest amount you will deduct on your taxes. Call us at 915-691-9072 to help you do the math.

Most people find that the monthly savings balance out the initial cost of refinancing. We can help you figure out what your options are, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at 915-691-9072 to get started.