Is Refinancing Worth the Cost?

Ever hear the old rule of thumb that says you should only consider refinancing if your new interest rate is at least 2 points under your present one? Maybe that was good advice several years ago, but as refinance costs have been getting lower, it could be time to look into it. Refinancing your mortgage loan has some benefits that often make it worth the initial expenditure many times over.

Benefits

When you refinance, you could have the ability to lower your interest rate and monthly mortgage payment amount, perhaps considerably. You also might have the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. You may have the option to refinance into a shorter-term mortgage, enabling you to build your equity quicker.

Fees and Expenses

Of course, you will have some fees and expenses during your refinance process. You will be charged the same types of fees as you did with your existing home loan. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

Doing the Math

You might look into paying points to reduce your interest rate. If you pay (on average) 3% of the loan amount at the start, your savings for the life of the new loan can be substantial. You may be told that points can be tax deductible, but because tax regulations are ever-changing, we urge you to consult with your tax professional before making decisions based on this.

An additional cost that a borrower may take into account is that a lower rate of interest will reduce the interest amount you'll be able to deduct from your federal income taxes. Call us at 973.249.7878 to help you do the math.