Is Refinancing Worth the Cost?

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Some have said that only if your new interest is at least 2 points below your current rate, should you refinance your loan. Perhaps that was sound advice a number of years ago, but since refinance costs have been falling recently, it may be a good time to look into it. Refinancing has a number of benefits that can make it worth the initial expenditure many times over.

Benefits

When you refinance, you may be able to reduce the interest rate and monthly payment , sometimes by a lot. Additionally, you could be given the option of tapping into the equity in your house by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. You may have the option to refinance into a shorter-term mortgage, enabling you to add to your equity faster.

Fees and Expenses

All these advantages do come with some expense, though. When you refinance, you are paying for basically the same things you paid for when you obtained your current mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

Paying discount points can get you a lower interest rate. The amount you'll save over the life of the loan might be substantial if you have paid up front about 3% of the new loan balance. You may be told that points may be deducted on your income taxes, but as tax regulations can be difficult to keep up with, we urge you to speak with your tax professional before making any decisions based on this.

Another cost that a borrower may consider is that a lower rate of interest will reduce the interest amount you'll deduct on your federal income taxes. Call us at (973) 601-2122 to help you do the math.

Most people find that the monthly savings quickly balance out the up-front cost of a refinance. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your money on hand. Call us at (973) 601-2122 to get you started.

Curious about refinancing your home? Call us: (973) 601-2122.

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