When is Refinancing Worth it?


It has been said that only when your new interest is at least 2 points under your current rate, should you refinance your mortgage. Maybe several years ago that was good advice, but as refinance costs have been getting lower, it may be a good time to look into it. Refinancing has a variety of advantages that often make it worth the up-front expenditure several times over.

Benefits from Refinancing

You might be able to bring down your interest rate (sometimes significantly) and make smaller mortgage payments with a refinanced loan. Additionally, you may be given the option of pulling out some of your home equity by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also get the chance to build your home equity faster by changing to a shorter-term mortgage.

The Cost

Of course, you will have some fees and expenses during the the refinance process. When you refinance, you are paying for basically the same things you paid for when you obtained your current mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You could offer to pay discount points (prepaid interest) to gain a better interest rate. Your savings over the life of the mortgage could be significant if you have paid up front about three percent of the new loan total. We recommend that you consult a tax professional before acting on rumors that any points paid may be deducted on your federal income taxes.

Speaking of taxes, when your interest rate is lowered, naturally you'll also be reducing the interest amount that you will be able to deduct on your taxes. This is one more cost that some borrowers take into account. We can help you do the math! Call us at (903) 630-7049.

All things considered, for most the total of up-front costs to refinance are paid back very quickly in monthly savings. We can help you explore what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at (903) 630-7049 to get you started.