When is Refinancing Worth it?

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Some have said that only if your new interest will be at least two points below your current rate, should you refinance your loan. Maybe several years ago that was good advice, but as refinance costs have been getting lower, it may be a good time to look into it. Refinancing your mortgage loan has various advantages that often make it worth the up-front expenditure several times over.

Advantages

You may be able to bring down your interest rate (sometimes significantly) and reduce your mortgage payment amount with a refinanced loan. You also might have the option of tapping into the equity in your house by "cashing out" a sum of money to fix up your home, consolidate debt, or take your family on a vacation. With lower interest rates, you might also get the chance to build your home equity faster by changing to a shorter term mortgage.

The Cost

All these advantages do come with some expense, though. You'll be charged the same sort of fees as you did with your existing home loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

Paying discount points can help you get a better interest rate. Your savings on the life of the loan might be substantial if you have paid up front about 3% of the new loan balance. You may hear that points can be deducted on your income taxes, but because tax regulations are ever-changing, we urge you to consult a tax professional before making decisions based on this.

Speaking of taxes, once you bring down your interest rate, it follows that you will also be reducing the interest amount that you will be able to deduct on your taxes. This is another expense that borrowers consider. Call us at 503-657-3311 to help you do the math.

All things considered, for most the total of initial costs to refinance are made up very quickly in savings each month. We can help you figure out your options, considering the effect a refinance could have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at 503-657-3311 to get started.

Curious about refinancing your home? Give us a call: 503-657-3311.