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

Depending on current interest rates, now may be the right time to consider a new loan! Refinancing has a number of benefits that often make it worth the up-front expenditure.

When you refinance, you may 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 -- whatever! With lower rates and balances, you might also be able to build up home equity faster with a new, shorter-term mortgage.

When you refinance, you are 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, etc.

You might have to pay a penalty if you refinance your previous mortgage too quickly. That depends on the terms of your existing mortgage.

You may need to pay points to get a more favorable interest rate. If you pay (on average) 3% of the loan amount up front, your savings for the life of the new mortgage can be significant. You should 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!

For most people the amount of up-front costs to refinance are made up very quickly in monthly savings. Redwood Capital Bank will 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.