Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that says you should only refinance if your new interest rate will be at least two points below your current rate? That could have been valid years ago, but with refinancing dropping in cost recently, it's a good time to think about a new loan! A refinance is often worth its cost several times over, factoring in the benefits that may come, in addition to a lower interest rate.

Advantages

You might be able to lower your interest rate (sometimes significantly) and have smaller mortgage payments with your refinanced loan. Additionally, you may be given the option of tapping into your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. You could have the option to refinance to a shorter-term mortgage loan, enabling you to build up your equity quicker.

Expenses and Fees

All these benefits do come with some expense, though. When you refinance, you're paying for many of the same things you paid for during your original mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.