When is Refinancing Worth it?

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Ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate is at least 2 points below your current one? Perhaps that was good advice a number of years ago, but as refinance costs have been falling recently, it may be time to take a serious look. A refinanced loan can be worth its cost many times over, factoring in the advantages that it brings, along with a lower interest rate.


You might be able to bring down your interest rate (sometimes significantly) and make smaller mortgage payments with a refinanced loan. You could also have the option to "cash out" some of your equity, which you can use to consolidate debts, improve your home, or take a vacation. With reduced interest rates, you might also be able to build your home equity more quickly by switching to a shorter-term loan.

Fees and Expenses

All of these benefits do come with some expense, though. You will have the same types of fees as you did with your present home loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Do the Math

You might think about paying points to reduce your interest rate. If you pay (on average) 3% of the loan amount at the start, the savings for the life of the refinanced loan can be significant. We recommend that you consult with a tax professional before acting on hear-say that the paid points can be deducted on your taxes.

Speaking of taxes, if your interest rate is lowered, it follows that you'll also be lowering the paid interest amount that you'll be able to deduct from your federal income taxes. This is one more cost that borrowers take into consideration. We can help you do the math! Call us at (214) 448-4641.

Most people find that the savings each month quickly outweigh the initial cost 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 available cash. Call us at (214) 448-4641 to get started.

Want to know more about refinancing your home? Call us: (214) 448-4641.

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