Is Refinancing Worth the Cost?
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Ever hear the old rule of thumb that says you should only refinance if the new interest rate is at least two points lower than your present rate? Perhaps that was good advice a number of years ago, but since refinance costs have been falling recently, it could be a good time to look into it. A refinanced mortgage loan can be worth its cost several times over, factoring in the advantages that it brings, as well as a lower interest rate.
Advantages
When you refinance, you could be able to lower your interest rate and monthly payment amount, sometimes significantly. You could also have the ability to "cash out" a portion of your home equity, that you will be able use to take care of higher interest debt, make home improvements, or take a vacation. You might be able to refinance into a shorter-term mortgage loan, enabling you to add to your equity faster.
The Cost
As you probably know, you'll have to pay for your process of refinancing. With your refinance, you're paying for basically the same things you were charged for during your current mortgage. Among these can be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might offer to pay points (prepaid interest) to attain a more favorable interest rate. Your savings over the life of the loan may be significant if you've paid up front about three percent of the new loan balance. You may hear that the points may be tax deductible, but because tax regulations can be ever-changing, please consult with your tax professional before making any decisions based on this.
Another cost that a borrower might take into account is that a lower interest rate will reduce the interest amount you will deduct on your federal income taxes. Call us at 9254610500 to help you do the math.
Most borrowers find that the monthly savings outweigh the initial cost of a refinance. We'll help you determine what loan program is ideal for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing will have on your taxes. Call us at 9254610500 to get started.
Want to know more about refinancing? Give us a call at 9254610500.