When is Refinancing Worth it?
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Ever heard the old rule of thumb that says you should only refinance if the new interest rate is at least two points below your present one? That may have been good advice a while back, but as refinancing has been costing less recently, it is never the wrong time to consider a new mortgage! A refinance is often worth its cost many times over, because of the benefits that it brings, as well as a lower interest rate.
Benefits from Refinancing
You may be able to lower your interest rate (sometimes substantially) and have smaller mortgage payments with a refinanced loan. You could also be able to "cash out" some of the built-up equity in your residence, which you may use to take care of higher interest debts, add on to your home, or take a vacation. With reduced interest rates, you might also be able to build up home equity more quickly by moving to a shorter-term mortgage.
The Cost
Of course, you will have some fees and expenses during the process of refinancing. You'll pay the same types of fees as you did with your current mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might offer to pay points (prepaid interest) to attain a more favorable rate of interest. Your savings on the life of the mortgage loan could be substantial if you've paid up front about 3% of the new loan balance. You might have heard that points can be deducted on your income taxes, but because tax regulations are difficult to keep up with, we urge you to consult with your tax professional before making decisions based on this.
Another thing about taxes is that if you reduce your interest rate, it follows that you will also be reducing the paid interest amount that you will be able to deduct on your taxes. This is another expense that some borrowers take into consideration. Call us at 6784672330 to help you do the math.
In the end, 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 could have on your taxes, whether you are likely to sell your home in the next couple of years, and your money on hand. Call us at 6784672330 to get you started.
Want to know more about refinancing? Give us a call: 6784672330.