Is Refinancing Worth the Cost?

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Some have said that only if your new interest is at least two points lower, should you refinance your mortgage. Maybe that was sound advice a number of years ago, but since refinance costs have been getting lower, it could be time to look into it. Refinancing has some advantages that often make it worth the initial expenditure several times over.

Advantages of Refinancing

When you refinance, you could be able to lower the interest rate and monthly mortgage payment amount, perhaps considerably. You may also have the ability to "cash out" some of the built-up equity in your residence, which you can use to take care of higher interest debts, add on to your home, or take a vacation. With reduced interest rates, you might also get the chance to build up home equity more quickly by switching to a shorter term mortgage loan.

Expenses and Fees

All of these benefits do cost something, though. You will have the same sort of fees as with your existing home loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might offer to pay discount points (prepaid interest) to get a lower rate of interest. The money you'll save over the life of the loan may be significant if you have paid up front about 3% of the new loan total. We recommend that you consult a tax professional before acting on hear-say that any points paid may be deducted on your taxes.

An additional cost that a borrower might consider is that a lower rate of interest will lower the interest amount you'll be able to deduct from your taxes. Call us at 314-835-1195 to help you do the math.

Ultimately, for most people the total of up-front costs to refinance will be made up soon in monthly savings. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at 314-835-1195 to get started.

Want to know more about refinancing your home? Give us a call at 314-835-1195.