When is Refinancing Worth it?
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Ever hear the pearl of wisdom that says you should only refinance if your new interest rate will be at least 2 points lower than your existing rate? That could have been sound advice years ago, but with refinancing dropping in cost recently, it's a good time to explore the options of a new mortgage! A refinanced mortgage loan is often worth its cost several times over, factoring in the benefits that it brings, along with a reduced interest rate.
Advantages
When you refinance, you may have the ability to lower your interest rate and mortgage payment amount, perhaps considerably. Additionally, you may have the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. You could be able to refinance into a shorter-term mortgage program, enabling you to build up your equity faster.
Fees and Expenses
All these benefits do come with some expense, though. You'll pay the same kinds of fees as you did with your present mortgage. These probably include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Do the Math
You could offer to pay points (prepaid interest) to gain a better rate of interest. Your savings over the life of the loan could be substantial if you've paid up front about three percent of the new loan total. You might hear that these points may be deducted on your income taxes, but because tax regulations can be difficult to keep up with, we urge you to consult with your tax professional before considering this in your calculations.
One more cost that borrowers might consider is that a lower rate of interest will reduce the interest amount you'll deduct on your taxes. Call us at 6784672330 to help you do the math.
All things considered, for most the amount of up-front costs to refinance will be paid back soon in monthly savings. We can help you explore what your options are, considering the effect a refinance may 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 6784672330 to get started.
Curious about refinancing? Call us: 6784672330.