Is Refinancing Worth the Cost?

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Some have said that only when your new interest is at least 2 points below your current rate, should you refinance your loan. That may have been accurate a while back, but with refinancing dropping in cost in recent years, it's never the wrong time to consider a new mortgage loan! A refinanced mortgage is often worth its cost many times over, because of the advantages that it brings, in addition to a reduced interest rate.

Benefits

You may be able to bring down your interest rate (sometimes substantially) and have smaller monthly payments with your refinanced loan. You may also be able to "cash out" some of your equity, that you will be able use to consolidate debt, improve your home, or plan a vacation. You may be able to refinance to a shorter-term mortgage loan, enabling you to add to your equity quicker.

The Cost

Of course, you'll have to pay for your process of refinancing. When you refinance, you're paying for many of the same things you paid for when you got your current mortgage loan. These may include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Do the Math

You might investigate paying points to reduce your interest rate. Your savings over the life of the loan may be significant if you have paid up front about three percent of the new loan balance. We recommend that you talk to a tax professional before acting on hear-say that any paid points can be deducted on your federal income taxes.

An additional expense that a borrower may take into account is that a lower interest rate will lower the interest amount you will be able to deduct on your taxes. Call us at 610-853-6500 to help you do the math.

In the end, for most the amount of initial costs to refinance are paid back very quickly in monthly savings. We'll work with you to find out what program is right for you, looking at your cash on hand, how likely you are to sell your house in the next few years, and how refinancing will effect your taxes. Call us at 610-853-6500 to get started.

Curious about refinancing? Give us a call at 610-853-6500.