Is Refinancing Worth the Cost?

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Have you ever heard the old rule of thumb that says you should only refinance if the new interest rate will be at least two points lower than your current rate? Maybe several years ago that was wise advice, but as refinance costs have been getting lower, it may be a good time to take a serious look. A refinanced loan is often worth its cost several times over, because of the benefits that it brings, as well as a lower interest rate.

Advantages of Refinancing

You could be able to bring down your interest rate (sometimes significantly) and make smaller mortgage payments with a refinanced mortgage loan. You could also be able to "cash out" some of the built-up equity in your home, which you may use to take care of higher interest debt, add on to your home, or finance a vacation. You could have the option to refinance to a shorter-term mortgage, giving you the ability to build your home equity quicker.

Expenses and Fees

All of these benefits do come with some expense, though. You'll have the same kinds of fees as with your existing mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Doing the Math

You could offer to pay points (prepaid interest) to get a better interest rate. If you pay (on average) three percent of the mortgage loan amount up front, your savings for the life of the refinanced mortgage loan can be significant. You might hear that the points may be tax deductible, but since tax regulations are ever-changing, please consult with a tax professional before depending on this.

Speaking of taxes, if your interest rate is lowered, it follows that you will also be reducing the interest amount that you'll be able to deduct on your taxes. This is another cost that borrowers consider. We can help you do the math! Call us at 918-748-4470/877-748-4470.

Most people find that the monthly savings balance out the initial expenses of a refinance. We will help you determine which loan program is the right fit for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing might effect your taxes. Call us at 918-748-4470/877-748-4470 to get started.

Curious about refinancing? Give us a call: 918-748-4470/877-748-4470.

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