When is Refinancing Worth it?

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Ever heard the old rule of thumb that says you should only consider refinancing if your new interest rate is at least 2 points under your present rate? Maybe several years ago that was sage advice, but since refinance costs have been getting lower, it could be time to look into it. A refinanced loan can be worth its cost many times over, considering the advantages that it brings, as well as a lower interest rate.

Advantages

When you refinance, you may have the ability to lower your interest rate and monthly mortgage payment amount, sometimes considerably. You may also be able to "cash out" a portion of the built-up equity in your residence, that you can use to take care of higher interest debts, improve your home, or take a vacation. You may have the option to refinance to a shorter-term mortgage, giving you the ability to add to your home equity faster.

Expenses and Fees

Of course, you'll have to pay for the the refinance process. With your refinance, you're paying for basically the same things you were charged for during your original mortgage loan. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You could offer to pay discount points (prepaid interest) to attain a lower interest rate. Your savings over the life of the mortgage could be substantial if you've paid up front about three percent of the new loan balance. We recommend that you talk to a tax professional before acting on advice that these paid points may be deducted on your taxes.

Another thing about taxes is that when you reduce 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 one more expense that some borrowers take into consideration. Call us at 718-441-7000 to help you do the math.

Most borrowers find that the monthly savings quickly outweigh the up-front expenses of a refinance. We'll work with you to find out what loan program is perfect for you, looking at your cash on hand, how likely you are to sell your residence in the next few years, and how refinancing could effect your taxes. Call us at 718-441-7000 to get started.

Curious about refinancing? Give us a call at 718-441-7000.

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