Is Refinancing Worth the Cost?

It has been said that only in the case your new interest is at least 2 points under your current rate, should you refinance your loan. Perhaps several years ago that was wise advice, but as refinance costs have been falling recently, it could be a good time to take a serious look. Refinancing your mortgage has various advantages that often make it worth the up-front expenditure several times over.

Benefits from Refinancing

You might be able to lower your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with your refinanced loan. You could also be able to "cash out" some of your equity, which you are able use to consolidate debt, improve your home, or plan a vacation. With lower rates, you may also get the chance to build up home equity faster by changing to a shorter-term mortgage.

The Cost

As you probably expect, you will have to pay for your process of refinancing. With your refinance, you're paying for basically the same things you paid for when you obtained your existing mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

You could be obligated to pay a penalty if you refinance your existing loan too soon. It all depends on your current mortgage loan agreement. However, some of these penalties apply only to the first couple of years of your loan. We will help you with the details: contact us at (816) 916-7723.

Doing the Math

You might look into paying points to get a lower interest rate. If you pay (on average) 3% of the loan amount at the start, your savings for the term of the refinanced mortgage can be significant. You might have heard that these points can be tax deductible, but as tax regulations can be ever-changing, please speak with your tax professional before considering this in your calculations.

One more expense that borrowers may take into account is that a lower rate of interest will reduce the interest amount you will deduct from your federal income taxes. Call us at (816) 916-7723 to help you do the math.

All things considered, for most borrowers the amount of up-front costs to refinance will be made up very quickly in savings each month. We will help you determine what program is perfect for you, considering your cash on hand, the likelihood of selling your house in the next few years, and how refinancing may effect your taxes. Call us at (816) 916-7723 to get you started.