When is Refinancing Worth it?

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Have you ever heard the old rule of thumb that states you should only refinance if the new interest rate is at least two points under your existing rate? Maybe that was sound advice several years ago, but since refinance costs have been falling recently, it may be time to look into it. A refinance may be worth its cost many times over, considering the benefits that it brings, along with a lower interest rate.


When you refinance, you might have the ability to reduce your interest rate and monthly payment amount, perhaps considerably. You could also have the ability to "cash out" a portion of the built-up equity in your residence, that you may use to consolidate debts, improve your home, or plan a vacation. With lower interest rates, you might also get the chance to build your home equity faster by moving to a shorter-term mortgage.

Fees and Expenses

All of these benefits do cost something, though. You'll have the same types of fees as you did with your current mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might consider paying points to be given a reduced interest rate. Your savings on the life of the mortgage might be substantial if you've paid up front about 3% of the new loan balance. We recommend that you consult a tax professional before acting on rumors that the points paid can be deducted on your federal income taxes.

Another thing about taxes is that when your interest rate is reduced, it follows that you'll also be reducing the interest amount that you may deduct from your taxes. This is one more expense that borrowers take into consideration. We can help you do the math! Call us at 3032282254.

All things considered, for most people the total of up-front costs to refinance will be paid back soon in savings each month. We will work with you to figure out what mortgage loan program is ideal for you, looking at your cash on hand, how likely you are to sell your house in the next few years, and how refinancing can effect your taxes. Call us at 3032282254 to get you started.

Curious about refinancing your home? Call us: 3032282254.

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Firelight Mortgage Consultants

Company NMLS#: 381658

7887 East Belleview Ave Ste 1100
Englewood, CO 80111