When is Refinancing Worth it?
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Some have said that only in the case your new interest is at least two points under your current rate, should you refinance your mortgage. Perhaps several years ago that was sage advice, but since refinance costs have been falling recently, it could be time to look into it. A refinance is often worth its cost several times over, considering the benefits that it brings, in addition to a reduced interest rate.
Benefits
When you refinance, you might have the ability to reduce the interest rate and mortgage payment , sometimes considerably. You may also have the ability to "cash out" some of the built-up equity in your home, that you may use to take care of higher interest debt, make home improvements, or finance a vacation. You could have the option to refinance to a shorter-term mortgage loan, giving you the ability to build up your equity quicker.
Fees and Expenses
As you probably expect, you will have some fees and expenses during the process of refinancing. You will have the same types of expenses and fees as with your current home loan. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
Paying discount points can get you a better interest rate. When you pay (on average) 3% of the loan amount up front, your savings for the term of the new loan can be substantial. You may have heard that points can be tax deductible, but since tax regulations are ever-changing, please consult with a tax professional before making decisions based on this.
Speaking of taxes, when you reduce your interest rate, it follows that you'll also be reducing the paid interest amount that you'll be able to deduct on your federal income taxes. This is another expense that some borrowers take into account. Call us at 6233400934 to help you do the math.
Ultimately, for most people the total of up-front costs to refinance will be paid back very quickly in savings each month. We'll work with you to find out what program is the right fit for you, looking at your cash on hand, how likely you are to sell your residence in the next few years, and what effect refinancing might have on your taxes. Call us at 6233400934 to get started.
Curious about refinancing? Give us a call at 6233400934.