Is Refinancing Worth the Cost?

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Ever hear the pearl of wisdom that states you should only consider refinancing if your new interest rate is at least two points under your existing rate? That could have been valid years ago, but with refinancing dropping in cost in recent years, it is a good time to consider a new loan! Refinancing your loan has various advantages that often make it worth the up-front cost several times over.

Benefits

When you refinance, you could have the ability to lower the interest rate and mortgage payment , perhaps significantly. You might also be able to "cash out" a portion of your home equity, which you are able use to consolidate debt, improve your home, or plan a vacation. With reduced rates, you might also get the chance to build up home equity more quickly by moving to a shorter-term mortgage.

Expenses and Fees

Of course, you will have some fees and expenses during the the refinance process. When you refinance, you're paying for basically the same things you were charged for at the time you obtained your existing mortgage loan. These can include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Do the Math

You might look into paying points to reduce your interest rate. When you pay (on average) three percent of the loan amount up front, your savings for the term of the new mortgage can be great. You might be told that the points may be deducted on your income taxes, but because tax regulations can be ever-changing, we urge you to speak with a tax professional before making decisions based on this.

One more cost that borrowers might consider is that a reduced rate of interest will lower the interest amount you will deduct from your taxes. We can help you do the math! Call us at (808) 935-0678.

Most people find that the monthly savings balance out the up-front expenses of refinancing. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at (808) 935-0678 to get started.

Curious about refinancing? Give us a call at (808) 935-0678.

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