Is Refinancing Worth the Cost?

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Have you ever heard the pearl of wisdom that says you should only refinance if the new interest rate is at least two points lower than your present rate? That might have been accurate years ago, but with refinancing dropping in cost recently, it's a good time to consider a new mortgage! Refinancing has a variety of advantages that often make it worth the up-front expenditure a few times over.


When you refinance, you could have the ability to reduce your interest rate and monthly payment , sometimes significantly. You could also be able to "cash out" some of your home equity, which you are able use to take care of higher interest debt, make home improvements, or plan a vacation. You might be able to refinance into a shorter-term mortgage, enabling you to build up your equity faster.

The Cost

As you probably know, you'll have to pay for your the refinance process. You'll pay the same types of fees as you did with your present home loan. These can include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Doing the Math

You could need to pay discount points (prepaid interest) to get a better rate of interest. Your savings on the life of the mortgage loan might be substantial if you've paid up front about three percent of the new loan balance. We recommend that you talk to a tax professional before acting on rumors that these points paid can be deducted on your taxes.

Another expense that borrowers may take into account is that a lower interest rate will lower the interest amount you will be able to deduct from your taxes. Call us at 757-873-1287 to help you do the math.

Most people find that the monthly savings balance out the initial expenses of refinancing. We can help you explore your options, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the near future, and your cash on hand. Call us at 757-873-1287 to get you started.

Questions about refinancing your home? Call us: 757-873-1287.

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