Is Refinancing Worth the Cost?

Some have said that only when your new interest is at least 2 points lower, should you refinance your loan. Maybe several years ago that was good advice, but as refinance costs have been getting lower, it could be a good time to look into it. A refinance can be worth its cost several times over, because of the advantages that come, along with a reduced interest rate.

Advantages of Refinancing

You might be able to bring down your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with a refinanced mortgage. You may also have the option to "cash out" a portion of the built-up equity in your home, that you are able use to take care of higher interest debts, make home improvements, or finance a vacation. You may be able to refinance to a shorter-term mortgage loan, giving you the ability to add to your home equity quicker.

Fees and Expenses

All of these advantages do cost something, though. When you refinance, you're paying for basically the same things you paid for during your original mortgage. These can include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might think about paying points to reduce your interest rate. The money you will save on the life of the mortgage loan may be significant if you've paid up front about three percent of the new loan total. You may have heard that points can be deducted on your income taxes, but as tax regulations are ever-changing, we urge you to consult with your tax professional before making decisions based on this.

One more expense that a borrower may consider is that a reduced rate of interest will reduce the interest amount you'll be able to deduct from your federal income taxes. Call us at 202-625-1491 to help you do the math.

Most people find that the savings per month quickly outweigh the initial expenses of a refinance. We'll work with you to determine what mortgage loan program is right for you, considering your cash on hand, the likelihood of selling your home in the near future, and what effect refinancing will probably have on your taxes. Call us at 202-625-1491 to get you started.