Is Refinancing Worth the Cost?

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Some have said that only in the case your new interest is at least two points lower, should you refinance your loan. That might have been true a while back, but with the fact that refinancing has been costing less recently, it is a good time to explore the options of a new loan! A refinanced loan can be worth its cost many times over, considering the benefits that it brings, along with a reduced interest rate.

Advantages

When you refinance, you may have the ability to lower your interest rate and monthly payment , sometimes significantly. You might also have the ability to "cash out" some of your equity, that you may use to consolidate debts, improve your home, or take a vacation. With lower rates, you may also be able to build up home equity more quickly by switching to a shorter term loan.

Fees and Expenses

All of these advantages do cost something, though. You will be charged the same sort of fees as with your existing mortgage loan. These can include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Do the Math

You might think about paying points to reduce your interest rate. Your savings over the life of the loan might be substantial if you have paid up front about 3% of the new loan total. You might hear that the points can be deducted on your income taxes, but because tax regulations are difficult to keep up with, we urge you to consult a tax professional before considering this in your calculations.

Another cost that a borrower might consider is that a reduced interest rate will reduce the interest amount you'll deduct on your taxes. Call us at 718-441-7000 to help you do the math.

All things considered, for most people the total of initial costs to refinance are paid back very quickly in monthly savings. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you might be to sell in the next couple of years, and your available cash. Call us at 718-441-7000 to get started.

Want to know more about refinancing your home? Give us a call at 718-441-7000.

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