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Home / Blog / Refinance / What does it cost to refinance? What are the benefits?

What does it cost to refinance? What are the benefits?

May 27, 2011 By Mary Catchur

Ever heard the old ruThe Costs of Refinancing and its Benefitsle of thumb, you should only refinance if your new interest rate is at least two points lower? That may have been true years ago, but with refinancing dropping in cost over the last few years, it’s never the wrong time to think about a new loan! Refinancing has a number of benefits that often make it worth the up-front expenditure many times over.

When you refinance, you might be able to lower your interest rate and monthly payment — sometimes significantly. You might also be able to “cash-out” some of the built-up equity in your home, which you can use to consolidate debt, improve your home, take a vacation — anything! With lower rates and balances, you might also be able to build up home equity faster with a shorter-term new mortgage.

All these benefits do cost something, though. When you refinance, you’re paying for most of the same things you paid for when you obtained your original mortgage. These might include settlement costs and other fees, an appraisal, lender’s title insurance, underwriting fees, and so on. Use this Refinancing Mortgage calculator to determine what you can save when refinancing and if the benefits are worth the costs.

You might have to pay a penalty if you refinance your previous mortgage too quickly. That depends on the terms of your existing mortgage. These penalties are illegal in some places, and more often than not when they’re there apply only for the first year or two. We’ll help you figure it out.

You might pay points to get a more favorable interest rate. If you pay (on average) three percent of the loan amount upfront, your savings for the life of the new mortgage can be significant. You should be aware that the IRS has recently said that points paid for the purpose of refinancing your mortgage cannot be deducted in their entirety in the year you pay them unless the refinanced loan is primarily for home improvements. Consult your tax professional before deducting points you pay on your new mortgage from your federal income taxes.

Speaking of taxes, if you lower your interest rate, naturally you will be lowering the amount of mortgage interest payments you can deduct from your federal income taxes. This is another cost that some borrowers consider. We can help you do the math!

Ultimately, for most people, the amount of up-front costs to refinance are made up very quickly in monthly savings. We’ll work with you to determine what program is best for you, considering your cash on hand, how likely you are to sell your home in the near future, and what effect refinancing might have on your taxes.

Marimark Mortgage

Marimark Mortgage is based in Tampa, Florida, and helps homeowners refinance their mortgages in Florida, Virginia, and Pennsylvania.

We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.

To learn more about refinancing your home, please fill out our Quick Mortgage Application, or contact us directly to see if you’re a good candidate for refinancing.

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Filed Under: Refinance

Opinions, estimates, forecasts and other views contained in this page do not necessarily represent the views of Marimark Mortgage or its management and should not be construed as an offer to provide financing at the rates or terms mentioned. Due to market fluctuations, interest rates are subject to change at any time and without notice. Interest rates are also subject to credit and property approval. Although Marimark Mortgage attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. Information from this page may be used with proper attribution.

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    Refinancing with Mary an absolute pleasure

     
    Refinancing with Mary has been an absolute pleasure. I have never been through the process before and she took the time to explain each step. She was prompt (had a rate locked in right away) and most importantly always answered the phone or emails almost immediately! The communication line alone made the refinancing process every bit worth it. Would recommend to anyone, and will be back for any future purchases! Bret Brennan, March 2021
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