When is Refinancing Worth it?
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It has been said that only when your new interest will be at least two points under your current rate, should you refinance your loan. That may have been good advice a while back, but with refinancing dropping in cost recently, it's never the wrong time to consider a new mortgage loan! Refinancing your mortgage has various benefits that often make it worth the up-front cost a few times over.
Benefits from Refinancing
When you refinance, you might be able to lower your interest rate and monthly mortgage payment amount, perhaps considerably. You also might have the option of tapping into your home equity by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. You could have the option to refinance to a shorter-term mortgage loan, enabling you to build up your equity faster.
The Cost
All of these benefits do cost something, though. When you refinance, you are paying for basically the same things you were charged for when you obtained your existing mortgage loan. Among these can be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Do the Math
You could offer to pay points (prepaid interest) to gain a better rate of interest. The money you'll save on the life of the mortgage might be significant if you've paid up front about 3% of the new loan balance. You might hear that these points may be tax deductible, but because tax regulations can be ever-changing, please speak with a tax professional before making any decisions based on this.
An additional expense that borrowers might consider is that a reduced rate of interest will reduce the interest amount you'll be able to deduct from your taxes. Call us at 4054206125 to help you do the math.
All things considered, for most the total of up-front costs to refinance are paid back soon in monthly savings. We can help you explore what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at 4054206125 to get started.
Want to know more about refinancing? Give us a call at 4054206125.