When is Refinancing Worth it?

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Ever hear the old rule of thumb that says you should only consider refinancing if your new interest rate is at least two points below your existing one? That may have been valid years ago, but with refinancing dropping in cost recently, it's a good time to think about a new mortgage loan! Refinancing has various advantages that often make it worth the initial expenditure a few times over.

Advantages

When you refinance, you could have the ability to reduce the interest rate and monthly payment amount, sometimes by a lot. You might also have the option to "cash out" some of the built-up equity in your home, which you are able use to consolidate debts, improve your home, or plan a vacation. You might be able to refinance to a shorter-term mortgage program, giving you the ability to build up your equity faster.

Fees and Expenses

All these benefits do cost something, though. With your refinance, you are paying for basically the same things you were charged for during your existing mortgage. These can include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might think about paying points to reduce your interest rate. When you pay (on average) three percent of the loan amount initially, your savings for the life of the new mortgage can be significant. Please consult a tax professional before acting on rumors that the paid points can be deducted on your federal income taxes.

Another expense that borrowers might consider is that a lower interest rate will reduce the interest amount you'll be able to deduct from your taxes. We can help you do the math! Call us at 503-657-3311.

Most people find that the savings per month quickly balance out the initial cost of a refinance. We can help you find out what your options are, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the next couple of years, and your money on hand. Call us at 503-657-3311 to get you started.

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