Is Refinancing Worth the Cost?
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Have you ever heard the pearl of wisdom that says you should only refinance if the new interest rate is at least two points lower than your existing one? That could have been good advice years ago, but since refinancing has been costing less over the last few years, it is never the wrong time to explore the options of a new loan! Refinancing has some advantages that can make it worth the up-front cost many times over.
You might be able to bring down your interest rate (sometimes substantially) and reduce your monthly payment amount with a refinanced mortgage. You also may be given the option of tapping into your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. You might have the option to refinance to a shorter-term mortgage loan, enabling you to add to your home equity faster.
Expenses and Fees
All these benefits do cost something, though. With your refinance, you are paying for basically the same things you paid for when you obtained your current mortgage. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might consider paying points to reduce your interest rate. The money you will save on the life of the mortgage may be substantial if you've paid up front about 3% of the new loan balance. You may have heard that the points may be tax deductible, but as tax regulations can be difficult to keep up with, please speak with your tax professional before depending on this.
Speaking of taxes, once your interest rate is reduced, naturally you'll also be reducing the interest amount that you'll be able to deduct on your taxes. This is one more expense that borrowers take into account. Call us at (800) 974-0509 to help you do the math.
In the end, for most people the amount of initial costs to refinance are made up soon in monthly savings. We will work with you to figure out what mortgage loan program is best for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and how refinancing can effect your taxes. Call us at (800) 974-0509 to get you started.
Curious about refinancing your home? Give us a call: (800) 974-0509.