When is Refinancing Worth it?

Want to know more about refinancing your home? Give us a call: (408) 985-6400.

Ever heard the old rule of thumb that states you should only refinance if your new interest rate will be at least 2 points below your present rate? Maybe several years ago that was good advice, but as refinance costs have been falling recently, it could be time to look into it. Refinancing your loan has some benefits that will often make it worth the up-front cost a few times over.


When you refinance, you could be able to lower the interest rate and monthly mortgage payment , perhaps significantly. You could also have the option to "cash out" a portion of your home equity, that you will be able use to take care of higher interest debts, add on to your home, or take a vacation. With reduced rates, you might also be able to build your home equity more quickly by changing to a shorter-term mortgage.

The Cost

All of these advantages do come with some expense, though. With your refinance, you are paying for basically the same things you were charged for during your existing mortgage. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

When you refinance your present mortgage loan too soon, there might be a penalty . This depends on the terms of your existing mortgage loan. There are penalties that apply only to the first year or two. We will help you figure it out: contact us at (408) 985-6400.

Do the Math

You might consider paying points to reduce your interest rate. When you pay (on average) three percent of the loan amount at the start, the savings for the life of the new mortgage loan can be substantial. Please consult a tax professional before acting on advice that any points paid can be deducted on your federal income taxes.

Another cost that borrowers may take into account is that a lower rate of interest will reduce the interest amount you will be able to deduct from your federal income taxes. Call us at (408) 985-6400 to help you do the math.

All things considered, for most borrowers the total of up-front costs to refinance will be paid back very quickly in monthly savings. We'll work with you to determine which mortgage program is perfect for you, looking at your cash on hand, how likely you are to sell your home in the next few years, and the effect refinancing will probably have on your taxes. Call us at (408) 985-6400 to get started.

Looking for a loan? We'd be thrilled to talk about our many mortgage solutions! Give us a call at (408) 985-6400. Ready to get started? Apply Here.