Is Refinancing Worth the Cost?

Ever hear the old rule of thumb that states you should only refinance if your new interest rate will be at least 2 points below your existing rate? Perhaps several years ago that was wise advice, but as refinance costs have been falling recently, it may be a good time to look into it. A refinance can be worth its cost several times over, because of the benefits that it brings, as well as a reduced interest rate.

Benefits

When you refinance, you might be able to reduce your interest rate and mortgage payment , sometimes by a lot. You may also have the ability to "cash out" a portion of your equity, which you can use to take care of higher interest debt, make home improvements, or finance a vacation. With reduced interest rates, you might also get the chance to build up home equity more quickly by switching to a shorter-term mortgage loan.

Fees and Expenses

As you probably expect, you'll have to pay for the the refinance process. You'll pay the same kinds of fees as with your current home loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

You may have to pay a penalty if you refinance your current mortgage loan too soon. That depends on the rules of your current loan. These penalties might apply only to the first year or two of the loan. We'll help you with the details: contact us at 760.730.3722.

Doing the Math

Paying points can get you a lower interest rate. The amount you'll save on the life of the mortgage loan could be substantial if you have paid up front about 3% of the new loan balance. You may have heard that points can be tax deductible, but as tax regulations are difficult to keep up with, we urge you to consult your tax professional before depending on this.

Another cost that a borrower may consider is that a lower rate of interest will reduce the interest amount you'll deduct on your taxes. We can help you do the math! Call us at 760.730.3722.

Most borrowers find that the monthly savings quickly outweigh the up-front expenses of refinancing. We'll help you determine which mortgage program is best for you, looking at your cash on hand, how likely you are to sell your house in the near future, and how refinancing can effect your taxes. Call us at 760.730.3722 to get started.