When is Refinancing Worth it?

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Ever heard the pearl of wisdom that states you should only refinance if the new interest rate will be at least two points below your present one? That may have been accurate years ago, but with refinancing dropping in cost in recent years, it is never the wrong time to consider a new mortgage loan! Refinancing your loan has some advantages that will often make it worth the up-front expenditure a few times over.

Benefits from Refinancing

When you refinance, you might be able to lower the interest rate and monthly mortgage payment amount, sometimes by a lot. You also could have the option of pulling out some of the equity in your house by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. You could have the option to refinance to a shorter-term mortgage loan, giving you the ability to build your equity quicker.

Expenses and Fees

All of these advantages do cost something, though. You will have the same kinds of fees as with your existing mortgage. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might consider paying points to receive a better interest rate. Your savings over the life of the mortgage loan could be substantial if you've paid up front about three percent of the new loan balance. Please talk to a tax professional before acting on hear-say that these paid points may be deducted on your federal income taxes.

An additional cost that a borrower might take into account is that a lower rate of interest will lower the interest amount you'll deduct on your federal income taxes. Call us at 701.222.0100 to help you do the math.

Most people find that the monthly savings quickly outweigh the initial expenses of refinancing. We can help you explore 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 money on hand. Call us at 701.222.0100 to get you started.

Curious about refinancing? Call us: 701.222.0100.

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