Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that says you should only refinance if your new interest rate will be at least two points lower than your present one? Maybe that was sound advice several years ago, but as refinance costs have been falling recently, it could be time to take a serious look. A refinanced mortgage loan may be worth its cost several times over, factoring in the benefits that it brings, along with a reduced interest rate.

Advantages

You might be able to lower your interest rate (sometimes substantially) and make smaller monthly payments with a refinanced mortgage. You may also have the option to "cash out" some of your equity, that you may use to consolidate debts, improve your home, or finance a vacation. With reduced interest rates, you may also be able to build up home equity faster by changing to a shorter term loan.

Expenses and Fees

Of course, you will have to pay for your the refinance process. When you refinance, you are paying for basically the same things you paid for at the time you obtained your current mortgage loan. These might include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Do the Math

Paying points can help you attain a lower interest rate. Your savings over the life of the loan may be substantial if you've paid up front about three percent of the new loan balance. You might have heard that these points can be tax deductible, but as tax regulations can be difficult to keep up with, please consult with a tax professional before considering this in your calculations.

Another cost that a borrower might take into account is that a lower interest rate will lower the interest amount you'll deduct on your federal income taxes. Call us at (303) 228-2254 to help you do the math.

Most people find that the savings each month quickly outweigh the up-front cost of refinancing. We will help you determine what program is right for you, considering your cash on hand, the likelihood of selling your residence in the near future, and how refinancing could effect your taxes. Call us at (303) 228-2254 to get started.

Curious about refinancing? Call us: (303) 228-2254.

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