When is Refinancing Worth it?
Curious about refinancing? Give us a call: 623-340-0934.
Some have said that only when your new interest will be at least 2 points under your current rate, should you refinance your loan. Maybe several years ago that was wise advice, but as refinance costs have been getting lower, it may be time to take a serious look. A refinanced mortgage loan is often worth its cost several times over, because of the benefits that it brings, in addition to a reduced interest rate.
You may be able to bring down your interest rate (sometimes substantially) and reduce your monthly payment amount with a refinanced mortgage. You may also be able to "cash out" a portion of the built-up equity in your residence, that you will be able use to consolidate debt, improve your home, or take a vacation. With reduced rates, you might also get the chance to build your home equity faster by switching to a shorter term mortgage loan.
Fees and Expenses
Of course, you will have some fees and expenses during your the refinance process. When you refinance, you're paying for basically the same things you paid for when you got your current mortgage loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
If you refinance your existing mortgage loan too soon, you might have a penalty to pay. It all depends on your present loan contract. Some of these penalties apply only to the first year or two. We'll help you figure it out: contact us at 623-340-0934.
Do the Math
Paying discount points can help you get a better interest rate. If you pay (on average) 3% of the mortgage loan amount initially, the savings for the term of the new mortgage can be great. You may have heard that the points may be deducted on your income taxes, but since tax regulations can be ever-changing, we urge you to consult with your tax professional before considering this in your calculations.
One more cost that borrowers may consider is that a lower interest rate will reduce the interest amount you will deduct from your taxes. Call us at 623-340-0934 to help you do the math.
Most people find that the savings each month outweigh the up-front expenses of refinancing. We can help you explore what your options are, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at 623-340-0934 to get started.
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