Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that says you should only consider refinancing if the new interest rate is at least two points lower than your current rate? That might have been good advice years ago, but with the fact that refinancing has been costing less in recent years, it is never the wrong time to explore the options of a new mortgage loan! Refinancing has various advantages that can make it worth the up-front cost several times over.

Advantages of Refinancing

When you refinance, you might be able to lower the interest rate and monthly payment amount, perhaps considerably. You also might 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. You may be able to refinance into a shorter-term mortgage, enabling you to add to your equity quicker.

Expenses and Fees

All these advantages do come with some expense, though. You will have to pay the same kinds of fees as with your existing home loan. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

Paying points can result in a lower interest rate. If you pay (on average) 3% of the loan amount up front, your savings for the term of the refinanced loan can be significant. You may hear that these points can be tax deductible, but since tax regulations are difficult to keep up with, we urge you to consult your tax professional before making any decisions based on this.

Speaking of taxes, if you lower your interest rate, naturally you'll also be reducing the interest amount that you may deduct from your federal income taxes. This is one more cost that borrowers take into account. We can help you do the math! Call us at 703.255-5810.

Most people find that the monthly savings quickly balance out the up-front cost of a refinance. We can help you explore what your options are, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at 703.255-5810 to get you started.

Want to know more about refinancing your home? Call us at 703.255-5810.

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