When is Refinancing Worth It?

When is Refinancing Worth It


Some have said that you should refinance your mortgage only if the new interest rate is at least 2 points lower. That could have been valid a while back, but since refinancing has been costing less in recent years, when is refinancing worth it? It is never the wrong time to explore the options of a new mortgage! Refinancing your mortgage has a variety of benefits that will often make it worth the up-front expenditure many times over. 

Advantages of Refinancing 

When you refinance, you might be able to lower your interest rate and mortgage payment, sometimes significantly. You might also have the option to “cash out” some of the built-up equity in your residence that you may use to consolidate debt, add on to your home, or take a vacation. With lower interest rates, you might also be able to build up home equity faster by changing to a shorter-term loan. 

Expenses and Fees 

As you probably expect, you will have some fees and expenses during your refinance process. You’ll have to pay the same expenses and fees as with your current mortgage loan. Among these will be settlement costs, appraisal fees, lender’s title insurance, underwriting fees, and others. 

Doing the Math 

Paying points can get you a better interest rate. Your savings over the life of the mortgage could be significant if you’ve paid upfront about 3% of the new loan balance. You might be told that points may be tax-deductible, but since tax regulations can be difficult to keep up with, we urge you to speak with a tax professional before making any decisions based on this. 

Speaking of taxes, if you bring down your interest rate, it follows that you will also be reducing the interest amount that you may deduct from your federal income taxes. This amount is another cost that some borrowers take into consideration. Waterside Mortgage can help you do the math!  

Most people find that the monthly savings quickly outweigh the up-front refinancing expenses. I am here to help you understand when refinancing is worth it. I can help you explore your options, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Reach me, Victor Nassar, online or EMAIL US.