Is Refinancing Worth the Cost?
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Ever hear the old rule of thumb that states you should only refinance if the new interest rate is at least 2 points under your current one? Perhaps that was good advice a number of years ago, but as refinance costs have been getting lower, it may be time to look into it. Refinancing your mortgage loan has some advantages that often make it worth the up-front expenditure several times over.
Benefits from Refinancing
When you refinance, you could be able to lower your interest rate and mortgage payment , sometimes considerably. You also might have the option of tapping into the equity in your home by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. You may have the option to refinance into a shorter-term mortgage, enabling you to build up your home equity faster.
Expenses and Fees
As you probably know, you'll have some fees and expenses during the process of refinancing. When you refinance, you are paying for basically the same things you paid for at the time you obtained your original mortgage loan. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might need to pay points (prepaid interest) to gain a better rate of interest. If you pay (on average) three percent of the mortgage loan amount at the start, your savings for the life of the new loan can be significant. You may be told that the points may be tax deductible, but since tax regulations can be ever-changing, we urge you to consult with a tax professional before making any decisions based on this.
Speaking of taxes, once your interest rate is reduced, of course you will also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is another expense that borrowers take into account. We can help you do the math! Call us at (260) 338-2561.
Ultimately, for most the amount of initial costs to refinance will be made up very quickly in monthly savings. We will work with you to determine which loan program is ideal for you, considering your cash on hand, the likelihood of selling your residence in the near future, and how refinancing might effect your taxes. Call us at (260) 338-2561 to get you started.
Want to know more about refinancing? Give us a call: (260) 338-2561.