Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that says you should only refinance if the new interest rate will be at least two points lower than your current one? Maybe that was sound advice a number of years ago, but as refinance costs have been falling recently, it may be time to take a serious look. Refinancing has various advantages that will often make it worth the up-front cost a few times over.

Benefits

When you refinance, you could be able to lower your interest rate and monthly payment amount, perhaps by a lot. You might also be able to "cash out" a portion of your equity, that you may use to take care of higher interest debts, improve your home, or finance a vacation. With reduced rates, you might also get the chance to build up home equity more quickly by moving to a shorter term mortgage loan.

Fees and Expenses

As you probably know, you'll have some fees and expenses during your the refinance process. When you refinance, you are paying for basically the same things you paid for when you obtained your existing mortgage. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might investigate paying points to be given a reduced interest rate. The money you will save on the life of the loan may be substantial if you've paid up front about three percent of the new loan balance. You may hear that the points can be tax deductible, but as tax regulations can be difficult to keep up with, please consult a tax professional before depending on this.

Speaking of taxes, when you lower your interest rate, it follows that you will also be lowering the interest amount that you'll be able to deduct on your federal income taxes. This is one more expense that borrowers take into consideration. Call us at 703.255-5810 to help you do the math.

Most people find that the savings per month outweigh the initial expenses of a refinance. We'll work with you to determine what loan program is best for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and the effect refinancing might have on your taxes. Call us at 703.255-5810 to get started.

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

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