When is Refinancing Worth it?

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Ever hear the pearl of wisdom that says you should only refinance if your new interest rate is at least two points below your existing one? Perhaps several years ago that was wise advice, but as refinance costs have been getting lower, it could be a good time to look into it. A refinanced mortgage may be worth its cost several times over, considering the benefits that come, in addition to a reduced interest rate.

Advantages of Refinancing

When you refinance, you might be able to lower the interest rate and monthly payment amount, sometimes by a lot. Additionally, you might have the option of tapping into your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. You could be able to refinance into a shorter-term mortgage, enabling you to add to your home equity quicker.

Fees and Expenses

Of course, you'll have to pay for the the refinance process. You will have the same sort of fees as you did with your existing mortgage. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might look into paying points to reduce your interest rate. If you pay (on average) 3% of the mortgage loan amount up front, your savings for the life of the new loan can be significant. We recommend that you consult a tax professional before acting on advice that the points paid may be deducted on your federal income taxes.

Another thing about taxes is that once your interest rate is lowered, it follows that you will also be lowering the interest amount that you will be able to deduct on your federal income taxes. This is one more expense that borrowers take into consideration. Call us at (615) 717-3185 or (615) 417-2129 to help you do the math.

Most borrowers find that the savings per month quickly balance out the up-front cost of refinancing. We will work with you to determine what loan program is best for you, considering your cash on hand, how likely you are to sell your residence in the next few years, and the effect refinancing will probably have on your taxes. Call us at (615) 717-3185 or (615) 417-2129 to get started.

Want to know more about refinancing your home? Call us: (615) 717-3185 or (615) 417-2129.

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