Is Refinancing Worth the Cost?

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Have you ever heard the pearl of wisdom that states you should only refinance if your new interest rate will be at least two points lower than your existing one? That could have been valid a while back, but since refinancing has been costing less in recent years, it is never the wrong time to think about a new mortgage loan! A refinance is often worth its cost many times over, factoring in the benefits that can come, along with a reduced interest rate.

Benefits from Refinancing

When you refinance, you could be able to reduce your interest rate and monthly payment , sometimes considerably. You also may have the option of tapping into the equity in your house by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also get the chance to build your home equity faster by switching to a shorter-term loan.

The Cost

All these advantages do come with some expense, though. With your refinance, you're paying for basically the same things you paid for at the time you got your current mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might think about paying points to reduce your interest rate. Your savings over the life of the loan might be substantial if you've paid up front about 3% of the new loan total. We recommend that you consult with a tax professional before acting on hear-say that these paid points can be deducted on your federal income taxes.

An additional expense that a borrower might take into account is that a lower rate of interest will reduce the interest amount you will deduct from your taxes. We can help you do the math! Call us at 919-355-1034.

Most people find that the monthly savings outweigh the up-front expenses of refinancing. We will help you figure out which mortgage loan program is the best fit for you, looking at your cash on hand, how likely you are to sell your home in the near future, and the effect refinancing might have on your taxes. Call us at 919-355-1034 to get started.

Curious about refinancing? Call us at 919-355-1034.