When is Refinancing Worth it?
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Some have said that only if your new interest is at least two points lower, should you refinance your mortgage. Perhaps that was sound advice several years ago, but as refinance costs have been getting lower, it may be time to take a serious look. Refinancing has a number of advantages that can make it worth the initial cost a few times over.
Benefits
When you refinance, you might have the ability to lower the interest rate and monthly payment , perhaps considerably. Additionally, you may have the option of tapping into your home equity by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. With lower interest rates, you may also get the chance to build up home equity more quickly by moving to a shorter-term mortgage.
Fees and Expenses
All of these benefits do come with some expense, though. When you refinance, you are paying for basically the same things you paid for during your current mortgage loan. These might include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
Paying points can help you get a lower interest rate. If you pay (on average) three percent of the loan amount at the start, the savings for the life of the refinanced mortgage loan can be substantial. You might be told that the points may be deducted on your income taxes, but as tax regulations are ever-changing, we urge you to consult your tax professional before considering this in your calculations.
One more cost that borrowers may take into account is that a lower interest rate will reduce the interest amount you'll deduct from your federal income taxes. Call us at 9254610500 to help you do the math.
Ultimately, for most the amount of up-front costs to refinance will be paid back soon in monthly savings. We can help you explore your options, 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 cash on hand. Call us at 9254610500 to get you started.
Want to know more about refinancing your home? Call us at 9254610500.