When is Refinancing Worth it?
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Ever heard the old rule of thumb that says you should only refinance if your new interest rate is at least two points lower than your existing one? Perhaps several years ago that was good advice, but as refinance costs have been falling recently, it may be a good time to look into it. A refinanced loan is often worth its cost many times over, factoring in the benefits that it brings, along with a reduced interest rate.
Benefits
You could be able to bring down your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with your refinanced mortgage. You also might have the option of tapping into the equity in your house by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. You may have the option to refinance to a shorter-term mortgage program, enabling you to build your home equity quicker.
Fees and Expenses
All of these benefits do cost something, though. When you refinance, you are paying for a lot of the same things you paid for during your existing mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might investigate paying points to reduce your interest rate. If you pay (on average) three percent of the loan amount initially, the savings for the life of the refinanced loan can be great. We recommend that you talk to a tax professional before acting on rumors that these paid points may be deducted on your taxes.
One more expense that borrowers might consider is that a lower rate of interest will lower the interest amount you will be able to deduct on your taxes. Call us at 2148657442 to help you do the math.
Ultimately, for most borrowers the amount of initial costs to refinance are paid back very quickly in monthly savings. We'll work with you to determine which loan program is right for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and the effect refinancing may have on your taxes. Call us at 2148657442 to get you started.
Curious about refinancing your home? Give us a call at 2148657442.