When is Refinancing Worth it?

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It has been said that only in the case your new interest will be at least two points lower, should you refinance your mortgage. Maybe several years ago that was wise advice, but since refinance costs have been getting lower, it could be a good time to take a serious look. Refinancing your mortgage loan has a number of benefits that often make it worth the initial expenditure several times over.

Benefits

You might be able to lower your interest rate (sometimes substantially) and make smaller monthly payments with your refinanced loan. Additionally, you may have the option of pulling out some of your home equity by "cashing out" some funds to renovate your home, consolidate debt, or plan a special vacation. With lower rates, you may also be able to build your home equity more quickly by moving to a shorter-term mortgage loan.

Expenses and Fees

All these benefits do cost something, though. You'll be charged the same types of fees as you did with your existing mortgage. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might need to pay discount points (prepaid interest) to gain a better rate of interest. The amount you will save over the life of the loan may be substantial if you've paid up front about 3% of the new loan balance. You may be told that the points can be tax deductible, but because tax regulations are difficult to keep up with, please speak with your tax professional before depending on this.

An additional cost that borrowers might take into account is that a lower rate of interest will reduce the interest amount you will be able to deduct on your taxes. We can help you do the math! Call us at 7072522700.

Ultimately, for most borrowers the amount of up-front costs to refinance are made up very quickly in savings each month. We will help you determine what loan program is ideal for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and the effect refinancing will probably have on your taxes. Call us at 7072522700 to get started.

Curious about refinancing your home? Call us: 7072522700.

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