Is Refinancing Worth the Cost?

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Some have said that only if your new interest is at least two points lower, should you refinance your mortgage. Maybe several years ago that was sage advice, but since refinance costs have been getting lower, it could be a good time to look into it. A refinance may be worth its cost several times over, considering the benefits that may come, as well as a reduced interest rate.

Benefits from Refinancing

You might be able to lower your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with your refinanced mortgage loan. You also might be given the option of tapping into the equity in your house by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. With lower interest rates, you may also get the chance to build up home equity more quickly by moving to a shorter term mortgage loan.

Fees and Expenses

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

Doing the Math

Paying discount points can result in a better interest rate. If you pay (on average) three percent of the loan amount initially, the savings for the term of the new mortgage can be significant. We recommend that you talk to a tax professional before acting on advice that the paid points can be deducted on your taxes.

Speaking of taxes, if you lower your interest rate, naturally you will also be reducing the interest amount that you may deduct on your taxes. This is another expense that some borrowers take into account. Call us at 512-302-9410 to help you do the math.

Most borrowers find that the monthly savings balance out the initial cost of refinancing. We can help you explore your options, considering the effect a refinance could have on your taxes, how likely you might be to sell in the next couple of years, and your cash on hand. Call us at 512-302-9410 to get you started.

Curious about refinancing? Give us a call at 512-302-9410.

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