When is Refinancing Worth it?
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Have you ever heard the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least two points below your existing rate? Maybe several years ago that was good advice, but as refinance costs have been getting lower, it could be time to take a serious look. Refinancing has various advantages that will often make it worth the up-front expenditure many times over.
When you refinance, you could be able to reduce your interest rate and monthly payment , perhaps considerably. You could also be able to "cash out" a portion of your home equity, which you are able use to consolidate debt, make home improvements, or take a vacation. With lower rates, you may also be able to build your home equity more quickly by switching to a shorter-term mortgage loan.
Fees and Expenses
As you probably know, you'll have some fees and expenses during your the refinance process. When you refinance, you are paying for basically the same things you were charged for during your existing mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
Paying points can get you a lower interest rate. The amount you'll save on the life of the loan could be substantial if you have paid up front about 3% of the new loan total. You might hear that points can be tax deductible, but as tax regulations are ever-changing, we urge you to consult your tax professional before considering this in your calculations.
An additional cost that borrowers may take into account is that a lower interest rate will reduce the interest amount you'll deduct on your federal income taxes. We can help you do the math! Call us at (800) 974-0509.
All things considered, for most borrowers the amount of up-front 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, if you are likely to sell your home in the next couple of years, and your available cash. Call us at (800) 974-0509 to get started.
Want to know more about refinancing your home? Call us at (800) 974-0509.