Is Refinancing Worth the Cost?
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Ever hear the old rule of thumb that states you should only refinance if the new interest rate will be at least 2 points under your existing one? Perhaps that was good advice a number of years ago, but as refinance costs have been falling recently, it could be a good time to take a serious look. Refinancing has some benefits that can make it worth the initial cost many times over.
Benefits
You could be able to bring down your interest rate (sometimes by a lot) and have smaller mortgage payments with a refinanced mortgage loan. You may also be able to "cash out" a portion of the built-up equity in your home, which you may use to take care of higher interest debts, make home improvements, or take a vacation. With lower rates, you might also be able to build up home equity more quickly by switching to a shorter-term mortgage loan.
Expenses and Fees
All of these advantages do cost something, though. You'll pay the same kinds of expenses and fees as you did with your present mortgage loan. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might think about paying points to reduce your interest rate. When you pay (on average) 3% of the loan amount initially, the savings for the life of the refinanced mortgage loan can be significant. We recommend that you consult a tax professional before acting on rumors that these points paid can be deducted on your taxes.
Another cost that a borrower might consider is that a reduced rate of interest will reduce the interest amount you will deduct on your federal income taxes. Call us at 9043423622 to help you do the math.
Most people find that the savings each month quickly balance out the up-front cost of refinancing. We can help you find 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 near future, and your available cash. Call us at 9043423622 to get you started.
Want to know more about refinancing? Call us at 9043423622.