When is Refinancing Worth it?
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It has been said that only when your new interest will be at least 2 points under your current rate, should you refinance your loan. Perhaps that was sound advice a number of years ago, but as refinance costs have been getting lower, it could be a good time to look into it. A refinance can be worth its cost many times over, because of the benefits that come, as well as a lower interest rate.
Benefits
When you refinance, you may be able to lower the interest rate and monthly mortgage payment , perhaps significantly. You also may have the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. With reduced rates, you may also be able to build up home equity more quickly by changing to a shorter-term mortgage.
The Cost
All of these advantages do come with some expense, though. You will be charged the same types of expenses and fees as you did with your current mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying points can get you a lower interest rate. The money you'll save on the life of the mortgage loan may be substantial if you have paid up front about 3% of the new loan total. You might hear that points may be deducted on your income taxes, but because tax regulations are difficult to keep up with, we urge you to consult with a tax professional before depending on this.
Another thing about taxes is that if your interest rate is reduced, of course you will also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is one more cost that borrowers consider. Call us at 4056158543 to help you do the math.
In the end, for most people the amount of up-front costs to refinance are made up very quickly in savings each month. We can help you figure out what your options are, considering the effect a refinance could have on your taxes, how likely you may be to sell in the near future, and your money on hand. Call us at 4056158543 to get you started.
Want to know more about refinancing? Give us a call: 4056158543.