Is Refinancing Worth the Cost?

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Ever hear the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least 2 points under your existing rate? That might have been true years ago, but with refinancing dropping in cost in recent years, it's never the wrong time to consider a new mortgage loan! A refinance may be worth its cost many times over, factoring in the benefits that come, in addition to a lower interest rate.

Benefits

When you refinance, you may have the ability to reduce your interest rate and monthly payment amount, perhaps considerably. You might also be able to "cash out" a portion of your equity, that you are able use to take care of higher interest debt, make home improvements, or finance a vacation. With lower rates, you may also be able to build up home equity more quickly by changing to a shorter-term mortgage loan.

Expenses and Fees

As you probably expect, you'll have some fees and expenses during your process of refinancing. You'll have the same types of fees as you did with your current mortgage loan. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Do the Math

You might offer to pay discount points (prepaid interest) to gain a more favorable interest rate. If you pay (on average) 3% of the mortgage loan amount up front, your savings for the life of the refinanced mortgage can be substantial. We recommend that you consult a tax professional before acting on hear-say that the paid points may be deducted on your federal income taxes.

Speaking of taxes, when your interest rate is lowered, it follows that you will also be reducing the paid interest amount that you'll be able to deduct on your federal income taxes. This is one more expense that borrowers consider. We can help you do the math! Call us at 504-866-5626.

Ultimately, for most the total of initial costs to refinance are made up very quickly in monthly savings. We can help you figure out your options, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at 504-866-5626 to get you started.

Curious about refinancing your home? Give us a call at 504-866-5626.

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