When is Refinancing Worth it?
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Have you ever heard the old rule of thumb that says you should only refinance if your new interest rate will be at least two points lower than your existing one? That could have been accurate years ago, but with the fact that refinancing has been costing less in recent years, it is never the wrong time to think about a new loan! A refinance may be worth its cost many times over, considering the advantages that come, in addition to a lower interest rate.
Benefits from Refinancing
When you refinance, you could be able to reduce the interest rate and mortgage payment , sometimes considerably. You may also have the option to "cash out" a portion of the built-up equity in your home, which you can use to take care of higher interest debt, add on to your home, or finance a vacation. You may have the option to refinance into a shorter-term mortgage loan, giving you the ability to add to your home equity faster.
Expenses and Fees
All these benefits do come with some expense, though. When you refinance, you are paying for basically the same things you paid for when you got your original mortgage loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
Paying points can help you get a better interest rate. If you pay (on average) 3% of the mortgage loan amount up front, your savings for the life of the refinanced mortgage can be substantial. Please consult with a tax professional before acting on rumors that the points paid may be deducted on your federal income taxes.
An additional cost that a borrower may consider is that a lower rate of interest will reduce the interest amount you'll deduct from your taxes. We can help you do the math! Call us at 4104614043.
In the end, for most people the total of initial costs to refinance are made up very quickly in savings each month. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at 4104614043 to get started.
Want to know more about refinancing? Call us at 4104614043.