When is Refinancing Worth it?

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Ever heard the old rule of thumb that says you should only refinance if your new interest rate will be at least 2 points under your present one? Maybe that was sound advice a number of years ago, but since refinance costs have been getting lower, it may be time to take a serious look. A refinance can be worth its cost many times over, factoring in the benefits that may come, along with a lower interest rate.


You might be able to bring down your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with your refinanced mortgage loan. You also might be given the option of pulling out some of your home equity by "cashing out" some funds to renovate your home, consolidate debt, or plan a special vacation. With lower rates, you may also get the chance to build your home equity more quickly by moving to a shorter-term mortgage.

The Cost

All these advantages do come with some expense, though. You will be charged the same sort of fees as you did with your current home loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

Paying discount points can result in a lower interest rate. Your savings on the life of the loan might be substantial if you've paid up front about three percent of the new loan total. Please consult a tax professional before acting on rumors that these paid points can be deducted on your federal income taxes.

Another cost that a borrower may consider is that a lower interest rate will lower the interest amount you'll be able to deduct from your taxes. Call us at 703.255-5810 to help you do the math.

Most people find that the monthly savings outweigh the initial cost of refinancing. We'll work with you to determine what mortgage program is perfect for you, taking into account your cash on hand, how likely you are to sell your home in the near future, and what effect refinancing will have on your taxes. Call us at 703.255-5810 to get you started.

Want to know more about refinancing your home? Give us a call: 703.255-5810.

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