When is Refinancing Worth it?
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Some have said that only if your new interest is at least two points below your current rate, should you refinance your mortgage. Maybe several years ago that was sage advice, but since refinance costs have been falling recently, it may be a good time to look into it. A refinance is often worth its cost several times over, considering the advantages that it brings, as well as a lower interest rate.
Benefits from Refinancing
You might be able to bring down your interest rate (sometimes significantly) and reduce your mortgage payment amount with your refinanced mortgage loan. You may also have the ability to "cash out" a portion of the built-up equity in your residence, which you are able use to take care of higher interest debt, make home improvements, or finance a vacation. With lower rates, you may also get the chance to build up home equity faster by switching to a shorter-term mortgage.
Fees and Expenses
Of course, you'll have some fees and expenses during the process of refinancing. You will have to pay the same kinds of expenses and fees as you did with your current mortgage loan. These may include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
Paying discount points can help you get a lower interest rate. When you pay (on average) three percent of the mortgage loan amount initially, the savings for the life of the new loan can be substantial. You may hear that the points may be tax deductible, but as tax regulations are difficult to keep up with, we urge you to consult with a tax professional before considering this in your calculations.
Speaking of taxes, once your interest rate is lowered, of course you'll also be reducing the interest amount that you'll be able to deduct on your federal income taxes. This is another cost that some borrowers take into consideration. Call us at 7184417000 to help you do the math.
All things considered, for most borrowers the total of up-front costs to refinance are paid back soon in monthly savings. We can help you explore your options, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at 7184417000 to get you started.
Want to know more about refinancing? Call us: 7184417000.