Is Refinancing Worth the Cost?
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Shopping for a mortgage loan? We'd be thrilled to answer your questions about our mortgage offerings! Give us a call today at 303-523-7119. Ready to begin? Apply Now.
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Have you ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least 2 points below your current one? Perhaps that was good advice a number of years ago, but as refinance costs have been getting lower, it may be a good time to look into it. Refinancing your mortgage has some advantages that often make it worth the initial cost many times over.
Benefits
You could be able to bring down your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with a refinanced mortgage loan. Additionally, you might be given the option of pulling out some of the equity in your house by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. With lower interest rates, you may also get the chance to build up home equity more quickly by changing to a shorter term loan.
Fees and Expenses
All of these benefits do come with some expense, though. You'll be charged the same types of expenses and fees as you did with your present mortgage. These can include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
You might need to pay points (prepaid interest) to get a more favorable interest rate. The money you'll save over the life of the mortgage loan could be substantial if you've paid up front about three percent of the new loan balance. You may be told that the points may be tax deductible, but because tax regulations are difficult to keep up with, please consult a tax professional before depending on this.
Another thing about taxes is that if you lower your interest rate, of course you'll also be reducing the interest amount that you'll be able to deduct from your taxes. This is one more cost that some borrowers take into account. Call us at 303-523-7119 to help you do the math.
Most borrowers find that the savings per month outweigh the up-front expenses of refinancing. We'll work with you to determine which mortgage loan program is right for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and the effect refinancing will have on your taxes. Call us at 303-523-7119 to get started.
Want to know more about refinancing your home? Give us a call at 303-523-7119.