Is Refinancing Worth the Cost?

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Ever heard the old rule of thumb that states you should only refinance if the new interest rate will be at least two points under your existing one? That might have been sound advice a while back, but with refinancing dropping in cost over the last few years, it is never the wrong time to think about a new mortgage loan! Refinancing has some advantages that often make it worth the up-front expenditure a few times over.

Advantages

You might be able to bring down your interest rate (sometimes substantially) and have smaller monthly payments with a refinanced mortgage. Additionally, you may be given the option of tapping into your home equity by "cashing out" a sum of money to remodel your home, consolidate debt, or plan a special vacation. You might be able to refinance to a shorter-term mortgage, giving you the ability to build up your equity quicker.

The Cost

Of course, you will have some fees and expenses during your process of refinancing. With your refinance, you are paying for basically the same things you paid for during your existing mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

Paying discount points can result in a better interest rate. The amount you'll save on the life of the mortgage might be significant if you have paid up front about 3% of the new loan balance. You might have heard that the points can be tax deductible, but as tax regulations can be difficult to keep up with, we urge you to consult with a tax professional before depending on this.

Another expense that a borrower might consider is that a lower interest rate will lower the interest amount you'll be able to deduct on your taxes. We can help you do the math! Call us at (732) 969-9300.

In the end, for most people the total of initial costs to refinance will be paid back very quickly in monthly savings. We can help you figure out what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at (732) 969-9300 to get started.

Curious about refinancing your home? Call us at (732) 969-9300.

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