When is Refinancing Worth it?
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Some have said that only in the case your new interest is at least 2 points under your current rate, should you refinance your loan. That could have been true a while back, but with refinancing dropping in cost in recent years, it's a good time to think about a new loan! A refinance is often worth its cost several times over, factoring in the advantages that it brings, along with a reduced interest rate.
Benefits
You might be able to bring down your interest rate (sometimes significantly) and have smaller monthly payments with your refinanced mortgage loan. Additionally, you might be given the option of pulling out some of your home equity by "cashing out" some money to renovate your home, consolidate debt, or take your family on a vacation. With reduced rates, you may also get the chance to build up home equity faster by switching to a shorter term loan.
The Cost
All of these benefits do come with some expense, though. When you refinance, you are paying for basically the same things you paid for when you got your existing mortgage. Among these can be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Do the Math
You might think about paying points to be given a reduced interest rate. If you pay (on average) 3% of the loan amount at the start, your savings for the life of the new loan can be great. Please consult with a tax professional before acting on rumors that the points paid can be deducted on your federal income taxes.
Another thing about taxes is that once your interest rate is reduced, it follows that you'll also be lowering the interest amount that you'll be able to deduct from your federal income taxes. This is one more cost that borrowers take into account. Call us at 866-300-1550 to help you do the math.
Ultimately, for most borrowers the total of up-front costs to refinance are made up soon in savings each month. We can help you explore your options, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at 866-300-1550 to get started.
Curious about refinancing? Call us: 866-300-1550.