Why Refinance?

People usually refinance their home mortgage to take advantage of lower interest rates, which will decrease the monthly payment they have to make.

How Much Does Refinancing Cost?

According to Lender Tree, you should expect to pay about 3 percent to 6 percent of the amount you are refinancing. For example, if you were refinancing $200,000, you should expect to pay between $6,000 and $12,000.

What Are Discount Points?

Discount points are an optional cost that you can pay to lower the interest rate on your loan. Each point costs 1 percent of the loan and decreases your interest rate by about 0.25 percent, depending on the lender.

Do Discount Points Carry Over?

If you paid for discount points with your mortgage, none will carry over when you refinance. Even if you have only had your mortgage for a short time, you will have to pay for any discount points you want applied to your new refinanced loan.

Deducting Points

Another drawback of refinancing is that if you pay for points to lower your interest rate when you refinance, you cannot deduct them all at once like you can mortgage points. Instead, you must deduct them over the life of the loan.

Source:

IRS.gov: Form 1040; Schedule A---Itemized Deductions

Bankrate: Refinance Closing Cost Options; Michele Lerner

Lending Tree: Mortgage Refinancing Basics