When is Refinancing Worth it?

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Ever hear the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least two points lower than your existing one? That may have been true years ago, but with refinancing dropping in cost in recent years, it's a good time to consider a new mortgage! Refinancing has a number of benefits that often make it worth the up-front cost a few times over.


You may be able to lower 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 your home equity by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you may also get the chance to build your home equity more quickly by changing to a shorter-term mortgage.

The Cost

Of course, you will have some fees and expenses during the process of refinancing. With your refinance, you're paying for a lot of the same things you paid for during your original mortgage. These may include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Do the Math

You might think about paying points to get a lower interest rate. When you pay (on average) 3% of the loan amount at the start, the savings for the term of the refinanced mortgage loan can be great. We recommend that you consult with a tax professional before acting on hear-say that these paid points may be deducted on your taxes.

Another thing about taxes is that when your interest rate is reduced, of course you will also be reducing the interest amount that you'll be able to deduct on your taxes. This is one more cost that borrowers take into account. Call us at (860) 658-7100 to help you do the math.

Most people find that the monthly savings quickly balance out the initial cost of refinancing. We'll help you determine which loan program is right for you, taking into account your cash on hand, how likely you are to sell your house in the next few years, and what effect refinancing could have on your taxes. Call us at (860) 658-7100 to get you started.

Want to know more about refinancing? Give us a call: (860) 658-7100.