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 is at least 2 points below your existing rate? Perhaps that was good advice a number of years ago, but as refinance costs have been falling recently, it could be a good time to look into it. Refinancing your mortgage has some benefits that often make it worth the up-front expenditure a few times over.

Benefits

When you refinance, you might have the ability to lower your interest rate and monthly payment amount, perhaps significantly. You also might be given the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. You might be able to refinance to a shorter-term mortgage program, giving you the ability to add to your home equity quicker.

Expenses and Fees

As you probably expect, you'll have some fees and expenses during your the refinance process. With your refinance, you are paying for a lot of the same things you were charged for during your original mortgage loan. These could include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Do the Math

Paying points can help you get a lower interest rate. The money you'll save on the life of the loan could be significant if you have paid up front about three percent of the new loan total. Please consult with a tax professional before acting on advice that any points paid can be deducted on your federal income taxes.

Another cost that borrowers may consider is that a reduced rate of interest will lower the interest amount you'll be able to deduct from your taxes. Call us at 714-970-9700 to help you do the math.

Most people find that the monthly savings quickly balance out the up-front cost of a refinance. We'll work with you to figure out which loan program is the ideal fit for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing will have on your taxes. Call us at 714-970-9700 to get you started.

Curious about refinancing your home? Give us a call at 714-970-9700.

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