When is Refinancing Worth it?

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It has been said that only if your new interest will be at least 2 points below your current rate, should you refinance your loan. That may have been accurate a while back, but as refinancing has been costing less in recent years, it is a good time to think about a new loan! Refinancing your mortgage has various advantages that will often make it worth the up-front cost several times over.

Advantages of Refinancing

When you refinance, you could be able to lower the interest rate and monthly payment amount, sometimes considerably. You could also be able to "cash out" a portion of your home equity, which you may use to take care of higher interest debts, make home improvements, or finance a vacation. You might have the option to refinance to a shorter-term mortgage, enabling you to add to your equity faster.

Expenses and Fees

All of these advantages do come with some expense, though. When you refinance, you are paying for a lot of the same things you were charged for during your existing mortgage loan. These might include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Do the Math

You might need to pay points (prepaid interest) to attain a better interest rate. The money you'll save over the life of the mortgage loan might be substantial if you have paid up front about three percent of the new loan balance. You might be told that points can be tax deductible, but as tax regulations can be difficult to keep up with, please consult a tax professional before depending on this.

Another thing about taxes is that when your interest rate is lowered, it follows that you will also be reducing the interest amount that you may deduct on your federal income taxes. This is one more cost that borrowers take into account. We can help you do the math! Call us at 214-865-7442.

Most people find that the savings per month outweigh the up-front cost of refinancing. We can help you explore what your options are, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at 214-865-7442 to get you started.

Curious about refinancing your home? Give us a call at 214-865-7442.

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