Is Refinancing Worth the Cost?

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Ever heard the old rule of thumb that says you should only refinance if your new interest rate will be at least two points under your present one? Maybe that was sound advice a number of years ago, but as refinance costs have been getting lower, it could be time to look into it. Refinancing your mortgage has various benefits that will often make it worth the up-front cost several times over.

Advantages

You may be able to bring down your interest rate (sometimes significantly) and reduce your monthly payment amount with a refinanced loan. You also might be given the option of pulling out some of the equity in your house by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. You could be able to refinance to a shorter-term mortgage program, enabling you to build up your home equity faster.

Fees and Expenses

Of course, you'll have to pay for your process of refinancing. With your refinance, you're paying for basically the same things you were charged for at the time you obtained your current mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

Paying points can result in a better interest rate. Your savings over the life of the loan could be significant if you've paid up front about 3% of the new loan balance. Please consult with a tax professional before acting on hear-say that these paid points can be deducted on your federal income taxes.

Speaking of taxes, when your interest rate is lowered, it follows that you will also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is one more expense that some borrowers consider. Call us at (808) 935-0678 to help you do the math.

Most people find that the savings per month balance out the initial cost of a refinance. We can help you explore what your options are, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at (808) 935-0678 to get you started.

Want to know more about refinancing your home? Give us a call: (808) 935-0678.

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