Is Refinancing Worth the Cost?

Have you ever heard the pearl of wisdom that says you should only refinance if your new interest rate is at least 2 points lower than your present one? That might have been true a while back, but with refinancing dropping in cost over the last few years, it is never the wrong time to explore the options of a new loan! Refinancing your mortgage loan has some benefits that often make it worth the up-front expenditure many times over.

Advantages of Refinancing

You might be able to bring down your interest rate (sometimes by a lot) and make smaller monthly payments with a refinanced mortgage loan. You could also be able to "cash out" some of your equity, which you can use to take care of the higher-interest debt, add on to your home, or take a vacation. With reduced rates, you may also be able to build up home equity faster by switching to a shorter-term loan.

Expenses and Fees

All these benefits do come with some expense, though. You'll pay the same expenses and fees as your current mortgage loan. The list includes an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might look into paying points to get a lower interest rate. The amount you will save on the life of the mortgage might be substantial if you've paid about three percent of the new loan total upfront. We recommend that you consult a tax professional before acting on hearsay that any points paid can be deducted from your taxes.

Another thing about taxes is that if your interest rate is lowered, you'll also be reducing the interest amount that you can deduct from your taxes. This is another cost that borrowers take into account. We can help you do the math! Call us at (707) 964-0708.

All things considered, for most people, the total initial costs to refinance will be paid back very quickly in savings each month. We'll work with you to determine which program is the ideal fit for you, considering your cash on hand, the likelihood of selling your home in the near future, and the effect refinancing may have on your taxes. Call us at (707) 964-0708 to get started.