Is Refinancing Worth the Cost?

Have you ever heard the pearl of wisdom that says you should only refinance if the new interest rate will be at least two points below your current one? That could have been true a while back, but since refinancing has been costing less recently, it is never the wrong time to explore the options of a new loan! A refinance is often worth its cost many times over, considering the benefits that it brings, along with a reduced interest rate.

Benefits

When you refinance, you might have the ability to reduce the interest rate and monthly payment amount, perhaps considerably. You could also be able to "cash out" a portion of the built-up equity in your home, which you can use to consolidate debts, improve your home, or take a vacation. You could be able to refinance to a shorter-term mortgage, giving you the ability to build your equity quicker.

Fees and Expenses

All these benefits do come with some expense, though. You'll have to pay the same sort of fees as you did with your existing mortgage. These could include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.