Is Refinancing Worth the Cost?

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Ever heard the old rule of thumb that states you should only refinance if your new interest rate will be at least 2 points lower than your current rate? That might have been valid years ago, but with refinancing dropping in cost recently, it's never the wrong time to consider a new mortgage loan! A refinance can be worth its cost many times over, considering the advantages that may come, in addition to a lower interest rate.

Benefits

When you refinance, you might have the ability to lower the interest rate and mortgage payment , perhaps significantly. You also could have the option of tapping into your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also get the chance to build up home equity more quickly by switching to a shorter-term loan.

Fees and Expenses

All of these advantages do come with some expense, though. With your refinance, you're paying for basically the same things you paid for when you got your original mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Do the Math

You might consider paying points to be given a lower interest rate. When you pay (on average) 3% of the mortgage loan amount initially, the savings for the term of the new mortgage loan can be substantial. You might hear that the points can be deducted on your income taxes, but since tax regulations are difficult to keep up with, please consult with a tax professional before making any decisions based on this.

Another thing about taxes is that if your interest rate is lowered, it follows that you'll also be reducing the interest amount that you will be able to deduct from your taxes. This is one more expense that some borrowers consider. Call us at 504-866-5626 to help you do the math.

Most people find that the savings each month quickly balance out the initial expenses of a refinance. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 504-866-5626 to get you started.

Want to know more about refinancing your home? Give us a call at 504-866-5626.

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