Is Refinancing Worth the Cost?

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Some have said that only when your new interest is at least two points lower, should you refinance your mortgage. Perhaps several years ago that was wise advice, but as refinance costs have been falling recently, it could be time to look into it. Refinancing your mortgage loan has a number of advantages that often make it worth the initial cost a few times over.

Advantages

You might be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with your refinanced mortgage. You could also have the option to "cash out" a portion of your equity, that you can use to consolidate debts, make home improvements, or finance a vacation. You might be able to refinance into a shorter-term mortgage loan, giving you the ability to add to your home equity quicker.

The Cost

All these benefits do come with some expense, though. When you refinance, you're paying for most of the same things you were charged for at the time you obtained your existing mortgage. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You could offer to pay points (prepaid interest) to attain a lower interest rate. When you pay (on average) 3% of the mortgage loan amount up front, the savings for the term of the new loan can be substantial. You might have heard that these points can be deducted on your income taxes, but as tax regulations can be ever-changing, please consult your tax professional before considering this in your calculations.

Another cost that borrowers may take into account is that a lower interest rate will reduce the interest amount you'll be able to deduct on your taxes. Call us at (904) 342-3622 to help you do the math.

All things considered, for most people the amount of up-front costs to refinance will be paid back very quickly in monthly savings. We'll help you determine what program is perfect for you, looking at your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing might effect your taxes. Call us at (904) 342-3622 to get started.

Want to know more about refinancing? Call us at (904) 342-3622.

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2800 North Fifth Street Suite 301B
St. Augustine, FL 32084