When is Refinancing Worth it?

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Ever hear the old rule of thumb that states you should only refinance if the new interest rate will be at least two points under your existing rate? That could have been valid years ago, but since refinancing has been costing less over the last few years, it's a good time to think about a new mortgage! Refinancing your loan has a variety of benefits that can make it worth the initial expenditure several times over.

Advantages

When you refinance, you might have the ability to reduce your interest rate and mortgage payment amount, perhaps significantly. You also may be given the option of pulling out some of your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or take your family on a 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. With your refinance, you're paying for many of the same things you paid for during your current mortgage. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.