Is Refinancing Worth the Cost?

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Ever heard the pearl of wisdom that states you should only refinance if your new interest rate is at least two points under your existing one? Perhaps several years ago that was good advice, but as refinance costs have been falling recently, it may be time to take a serious look. A refinanced mortgage loan may be worth its cost many times over, considering the advantages that come, in addition to a reduced interest rate.

Advantages

When you refinance, you could be able to lower the interest rate and monthly payment , sometimes considerably. Additionally, you could be given the option of pulling out some of your home equity by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. You could be able to refinance to a shorter-term mortgage, enabling you to build up your equity quicker.

The Cost

All of these benefits do come with some expense, though. With your refinance, you're paying for basically the same things you paid for at the time you obtained your existing 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 offer to pay discount points (prepaid interest) to get a more favorable rate of interest. The money you'll save on the life of the loan might be substantial if you have paid up front about three percent of the new loan total. You might have heard that these points may be tax deductible, but since tax regulations can be ever-changing, we urge you to consult a tax professional before considering this in your calculations.

An additional cost that borrowers may consider is that a reduced interest rate will lower the interest amount you'll deduct on your federal income taxes. We can help you do the math! Call us at (610) 889-7467.

In the end, for most people the total of initial costs to refinance will be made up very quickly in monthly savings. We will help you figure out which loan program is the ideal fit for you, taking into account your cash on hand, the likelihood of selling your house in the near future, and how refinancing might effect your taxes. Call us at (610) 889-7467 to get you started.

Want to know more about refinancing your home? Give us a call: (610) 889-7467.

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