When is Refinancing Worth it?
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Have you ever heard the pearl of wisdom that states you should only refinance if your new interest rate is at least 2 points below your present rate? That may have been good advice years ago, but with refinancing dropping in cost recently, it's never the wrong time to explore the options of a new mortgage loan! A refinance is often worth its cost several times over, factoring in the advantages that may come, as well as a lower interest rate.
When you refinance, you might be able to reduce your interest rate and monthly payment amount, perhaps by a lot. Additionally, you may have the option of pulling out some of the equity in your property by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. You could have the option to refinance to a shorter-term mortgage, giving you the ability to build your home equity faster.
All these advantages do come with some expense, though. With your refinance, you're paying for basically the same things you paid for at the time you got your existing mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might investigate paying points to reduce your interest rate. When you pay (on average) 3% of the mortgage loan amount up front, the savings for the life of the refinanced loan can be substantial. You may hear that these points can be deducted on your income taxes, but because tax regulations are difficult to keep up with, please consult a tax professional before depending on this.
An additional expense that borrowers might take into account is that a lower interest rate will reduce the interest amount you will deduct on your federal income taxes. We can help you do the math! Call us at 623-340-0934.
In the end, for most borrowers the amount of initial costs to refinance are made up very quickly in monthly savings. We will help you determine what program is the right fit for you, taking into account your cash on hand, how likely you are to sell your house in the near future, and the effect refinancing will probably have on your taxes. Call us at 623-340-0934 to get started.
Curious about refinancing? Call us: 623-340-0934.