When is Refinancing Worth it?
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Ever heard the pearl of wisdom that says you should only refinance if your new interest rate is at least two points under your current rate? Maybe that was good advice several years ago, but as refinance costs have been getting lower, it could be time to take a serious look. Refinancing has some advantages that can make it worth the up-front expenditure several times over.
Benefits from Refinancing
When you refinance, you might have the ability to reduce the interest rate and monthly mortgage payment amount, perhaps by a lot. You might also have the option to "cash out" a portion of your equity, that you will be able use to consolidate debt, improve your home, or plan a vacation. You might be able to refinance into a shorter-term mortgage, enabling you to add to your equity faster.
Fees and Expenses
All these benefits do cost something, though. When you refinance, you are paying for many of the same things you were charged for during your current mortgage loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying points can help you attain a better interest rate. If you pay (on average) 3% of the loan amount at the start, the savings for the term of the new loan can be significant. You might have heard that the points may be tax deductible, but since tax regulations are difficult to keep up with, please speak with your tax professional before making any decisions based on this.
Speaking of taxes, when you reduce your interest rate, of course you'll also be lowering the interest amount that you may deduct on your taxes. This is one more expense that borrowers take into account. We can help you do the math! Call us at (800) 974-0509.
In the end, for most borrowers the total of initial costs to refinance will be made up soon in monthly savings. We'll help you determine what program is the best fit for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing can effect your taxes. Call us at (800) 974-0509 to get you started.
Want to know more about refinancing? Give us a call: (800) 974-0509.