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 under your current rate, should you refinance your mortgage. That could have been valid a while back, but with refinancing dropping in cost recently, it is a good time to think about a new mortgage loan! A refinance may be worth its cost many times over, considering the benefits that may come, along with a reduced interest rate.
You might be able to lower your interest rate (sometimes substantially) and reduce your monthly payment amount with a refinanced mortgage. You might also have the option to "cash out" some of your home equity, which you will be able use to take care of higher interest debt, make home improvements, or take a vacation. You might be able to refinance to a shorter-term mortgage program, enabling you to build up your home equity faster.
Expenses and Fees
All these benefits do come with some expense, though. You'll have the same sort of fees as you did with your existing home loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying points can result in a lower interest rate. If you pay (on average) 3% of the loan amount initially, the savings for the life of the refinanced mortgage loan can be great. You may hear that points can be deducted on your income taxes, but as tax regulations are ever-changing, we urge you to speak with a tax professional before considering this in your calculations.
Another thing about taxes is that if you bring down your interest rate, it follows that you'll also be reducing the paid interest amount that you'll be able to deduct on your taxes. This is another cost that some borrowers consider. We can help you do the math! Call us at 9043423622.
Most borrowers find that the monthly savings quickly outweigh the up-front cost of a refinance. We can help you figure out your options, considering the effect a refinance could have on your taxes, how likely you might be to sell in the near future, and your cash on hand. Call us at 9043423622 to get started.
Curious about refinancing your home? Give us a call: 9043423622.