Is Refinancing Worth the Cost?
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Some have said that only when your new interest is at least two points lower, should you refinance your mortgage. Perhaps that was sound advice several years ago, but since refinance costs have been getting lower, it could be a good time to take a serious look. Refinancing your loan has some benefits that can make it worth the initial expenditure many times over.
Advantages of Refinancing
When you refinance, you might have the ability to lower your interest rate and monthly payment amount, sometimes significantly. Additionally, you may be given the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you may also be able to build up home equity faster by changing to a shorter term mortgage.
Of course, you'll have to pay for the the refinance process. When you refinance, you're paying for basically the same things you paid for during your current mortgage loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Doing the Math
Paying points can help you attain a lower interest rate. When you pay (on average) 3% of the loan amount initially, the savings for the life of the refinanced loan can be great. Please consult a tax professional before acting on hear-say that the paid points may be deducted on your taxes.
Another thing about taxes is that once your interest rate is reduced, it follows that you'll also be reducing the paid interest amount that you'll be able to deduct from your federal income taxes. This is one more cost that some borrowers take into account. Call us at (800) 974-0509 to help you do the math.
Most borrowers find that the savings each month balance out the up-front cost of refinancing. We'll help you determine which program is right for you, considering your cash on hand, how likely you are to sell your residence in the next few years, and how refinancing could effect your taxes. Call us at (800) 974-0509 to get started.
Curious about refinancing? Call us: (800) 974-0509.