Is Refinancing Worth the Cost?

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Ever hear the pearl of wisdom that states you should only consider refinancing if your new interest rate will be at least 2 points below your current one? That may have been good advice a while back, but since refinancing has been costing less recently, it is never the wrong time to think about a new loan! Refinancing your mortgage loan has various benefits that often make it worth the initial cost many times over.


You could be able to lower your interest rate (sometimes substantially) and have smaller monthly payments with your refinanced mortgage. You could also be able to "cash out" a portion of your equity, which you may use to consolidate debts, make home improvements, or take a vacation. You might be able to refinance to a shorter-term mortgage loan, enabling you to build up your home equity faster.

Expenses and Fees

Of course, you will have to pay for the process of refinancing. You'll be charged the same sort of fees as with your existing mortgage. These can include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Do the Math

Paying points can get you a better interest rate. Your savings over the life of the mortgage loan could be significant if you've paid up front about 3% of the new loan balance. Please talk to a tax professional before acting on hear-say that these points paid can be deducted on your federal income taxes.

Speaking of taxes, once you bring down your interest rate, of course you will also be lowering the paid interest amount that you'll be able to deduct from your taxes. This is one more expense that borrowers take into consideration. Call us at (860) 658-7100 to help you do the math.

Ultimately, for most people the total of up-front costs to refinance are paid back soon in monthly savings. We can help you explore your options, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at (860) 658-7100 to get started.

Want to know more about refinancing? Call us at (860) 658-7100.