When is Refinancing Worth it?
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It has been said that only in the case your new interest is at least two points lower, should you refinance your mortgage. That could have been good advice a while back, but with refinancing dropping in cost recently, it is never the wrong time to think about a new mortgage loan! A refinance is often worth its cost several times over, because of the benefits that it brings, along with a reduced interest rate.
You may be able to bring down your interest rate (sometimes significantly) and reduce your monthly payment amount with your refinanced loan. You might also have the ability to "cash out" some of the built-up equity in your home, that you can use to consolidate debts, add on to your home, or finance a vacation. With lower rates, you might also be able to build up home equity more quickly by moving to a shorter-term loan.
All of these benefits do come with some expense, though. With your refinance, you're paying for a lot of the same things you were charged for when you obtained your current mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying points can result in a better interest rate. Your savings over the life of the mortgage loan might be substantial if you've paid up front about three percent of the new loan total. You might have heard that the points can be deducted on your income taxes, but because tax regulations are difficult to keep up with, we urge you to consult with your tax professional before making decisions based on this.
Another expense that borrowers might take into account is that a reduced interest rate will reduce the interest amount you'll deduct from your federal income taxes. Call us at (800) 974-0509 to help you do the math.
All things considered, for most the amount of up-front costs to refinance will be paid back very quickly in savings each month. We will work with you to determine what loan program is ideal for you, looking at your cash on hand, the likelihood of selling your home in the near future, and how refinancing could 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.