Is Refinancing Worth the Cost?

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Ever heard the old rule of thumb that states you should only consider refinancing if your new interest rate is at least two points below your current one? That might have been true a while back, but with the fact that refinancing has been costing less over the last few years, it's a good time to explore the options of a new mortgage loan! Refinancing has a variety of advantages that can make it worth the initial expenditure many times over.

Benefits from Refinancing

When you refinance, you might be able to lower your interest rate and monthly mortgage payment amount, sometimes by a lot. You might also have the ability to "cash out" some of the built-up equity in your home, which you will be able use to take care of higher interest debt, add on to your home, or plan a vacation. With reduced rates, you may also get the chance to build up home equity more quickly by switching to a shorter-term mortgage loan.

The Cost

All of these benefits do cost something, though. You'll have the same kinds of fees as with your existing home loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You might think about paying points to reduce your interest rate. If you pay (on average) 3% of the loan amount up front, the savings for the term of the refinanced mortgage loan can be substantial. We recommend that you consult with a tax professional before acting on advice that any points paid can be deducted on your taxes.

Speaking of taxes, if you bring down your interest rate, it follows that you will also be reducing the paid interest amount that you will be able to deduct on your taxes. This is another cost that borrowers take into consideration. We can help you do the math! Call us at (818)645-7035.

In the end, for most borrowers 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 best for you, looking at your cash on hand, how likely you are to sell your house in the near future, and how refinancing might effect your taxes. Call us at (818)645-7035 to get you started.

Curious about refinancing your home? Give us a call at (818)645-7035.

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