When is Refinancing Worth it?

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Have you ever heard the old rule of thumb that says you should only refinance if the new interest rate will be at least two points lower than your present rate? Maybe that was sound advice several years ago, but since refinance costs have been falling recently, it could be time to take a serious look. A refinanced mortgage may be worth its cost several times over, because of the advantages that it brings, in addition to a reduced interest rate.


When you refinance, you could be able to reduce your interest rate and mortgage payment , perhaps significantly. You could also have the option to "cash out" a portion of the built-up equity in your residence, that you can use to consolidate debts, add on to your home, or plan a vacation. With lower rates, you might also get the chance to build up home equity faster by changing to a shorter-term mortgage loan.

Expenses and Fees

All of these advantages do cost something, though. You will pay the same types of expenses and fees as with your present mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You might need to pay discount points (prepaid interest) to attain a more favorable interest rate. The money you'll save over the life of the loan may be substantial if you've paid up front about 3% of the new loan balance. Please consult a tax professional before acting on hear-say that the paid points may be deducted on your taxes.

One more cost that borrowers might take into account is that a lower rate of interest will lower the interest amount you will deduct from your taxes. Call us at (443) 619-7900 to help you do the math.

In the end, for most the total of initial costs to refinance are made up very quickly in savings each month. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your available cash. The refinancing of your existing mortgage may increase the total finance charges over the life of the loan.  Call us at (443) 619-7900 to get started.

Want to know more about refinancing your home? Call us at (443) 619-7900.

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