When is Refinancing Worth it?

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Ever hear the pearl of wisdom that states you should only consider refinancing if your new interest rate will be at least two points under your present rate? That may have been valid a while back, but since refinancing has been costing less recently, it is never the wrong time to explore the options of a new mortgage! Refinancing your mortgage has a variety of benefits that often make it worth the up-front cost a few times over.

Benefits

You could be able to lower your interest rate (sometimes substantially) and reduce your monthly payment amount with a refinanced mortgage loan. You could also have the ability to "cash out" some of your equity, which you are able use to consolidate debts, make home improvements, or finance a vacation. You may have the option to refinance into a shorter-term mortgage loan, enabling you to build up your equity faster.

The Cost

Of course, you'll have to pay for the process of refinancing. When you refinance, you are paying for most of the same things you were charged for during your original mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might need to pay points (prepaid interest) to gain a better rate of interest. The money you will save on the life of the mortgage could be substantial if you have paid up front about 3% of the new loan total. You may be told that these points can be tax deductible, but as tax regulations can be ever-changing, please consult your tax professional before depending on this.

An additional expense that borrowers may consider is that a lower rate of interest will lower the interest amount you will be able to deduct from your taxes. We can help you do the math! Call us at 703-288-0777.

Most borrowers find that the monthly savings outweigh the initial expenses of refinancing. We can help you find out your options, considering the effect a refinance could have on your taxes, how likely you might be to sell in the near future, and your cash on hand. Call us at 703-288-0777 to get you started.

Want to know more about refinancing your home? Call us: 703-288-0777.

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