When is Refinancing Worth it?

Want to know more about refinancing? Give us a call: 623-340-0934.

Ever heard the old rule of thumb that says you should only refinance if your new interest rate will be at least two points under your existing rate? That may have been sound advice years ago, but with refinancing dropping in cost in recent years, it is never the wrong time to think about a new mortgage loan! A refinance is often worth its cost many times over, considering the advantages that can come, in addition to a reduced interest rate.

Advantages of Refinancing

You could be able to bring down your interest rate (sometimes substantially) and make smaller mortgage payments with your refinanced mortgage loan. You might also have the ability to "cash out" a portion of your home equity, that you will be able use to consolidate debts, add on to your home, or plan a vacation. With reduced interest rates, you might also be able to build up home equity more quickly by changing to a shorter-term mortgage loan.

The Cost

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

You may be obligated to pay a penalty for refinancing your existing loan too soon. It all depends on your existing loan contract. There are penalties that just apply for the first year or two of the mortgage. We'll help you sort through the details: contact us at 623-340-0934.

Doing the Math

You might investigate paying points to reduce your interest rate. When you pay (on average) three percent of the loan amount up front, the savings for the life of the new mortgage can be substantial. Please consult a tax professional before acting on rumors that the paid points may be deducted on your taxes.

An additional cost that borrowers might take into account is that a reduced interest rate will reduce the interest amount you will be able to deduct from your federal income taxes. We can help you do the math! Call us at 623-340-0934.

Most people find that the monthly savings outweigh the initial expenses of refinancing. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your money on hand. Call us at 623-340-0934 to get started.

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