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 will be at least two points under your present rate? Maybe several years ago that was wise advice, but as refinance costs have been getting lower, it could be a good time to take a serious look. Refinancing your mortgage loan has some benefits that often make it worth the initial expenditure many times over.

Benefits

You could be able to bring down your interest rate (sometimes significantly) and make smaller mortgage payments with your refinanced loan. You may also be able to "cash out" some of your equity, which you may use to consolidate debt, add on to your home, or finance a vacation. You may have the option to refinance into a shorter-term mortgage loan, giving you the ability to add to your equity quicker.

The Cost

All these advantages do cost something, though. With your refinance, you are paying for basically the same things you paid for during your existing mortgage loan. These might include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Doing the Math

You might consider paying points to reduce your interest rate. When you pay (on average) 3% of the loan amount up front, the savings for the life of the refinanced loan can be substantial. Please consult a tax professional before acting on hear-say that the points paid can be deducted on your taxes.

Speaking of taxes, if your interest rate is reduced, of course you'll also be reducing the interest amount that you can deduct from your federal income taxes. This is one more cost that some borrowers take into consideration. We can help you do the math! Call us at 718-441-7000.

All things considered, for most the total of initial costs to refinance will be made up soon in savings each month. We will help you figure out which loan program is best for you, taking into account your cash on hand, the likelihood of selling your house in the next few years, and the effect refinancing might have on your taxes. Call us at 718-441-7000 to get you started.

Curious about refinancing your home? Call us at 718-441-7000.

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