When is Refinancing Worth it?

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Some have said that only in the case your new interest is at least two points under your current rate, should you refinance your mortgage. Maybe several years ago that was good advice, but since refinance costs have been getting lower, it may be time to look into it. A refinanced loan may be worth its cost many times over, because of the benefits that it brings, along with a lower interest rate.

Benefits from Refinancing

When you refinance, you might be able to lower your interest rate and monthly payment amount, perhaps by a lot. You might also be able to "cash out" a portion of your home equity, which you may use to consolidate debts, add on to your home, or plan a vacation. You could have the option to refinance to a shorter-term mortgage loan, giving you the ability to build up your equity faster.

The Cost

Of course, you will have some fees and expenses during your the refinance process. With your refinance, you're paying for many of the same things you were charged for at the time you obtained your current mortgage loan. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

Doing the Math

You might need to pay discount points (prepaid interest) to gain a lower interest rate. If you pay (on average) 3% of the mortgage loan amount initially, the savings for the life of the new mortgage can be significant. Please consult with a tax professional before acting on hear-say that the points paid may be deducted on your taxes.

Speaking of taxes, once you lower your interest rate, it follows that you will also be reducing the paid interest amount that you'll be able to deduct on your taxes. This is one more expense that some borrowers take into account. We can help you do the math! Call us at 2603382561.

In the end, for most the amount of up-front costs to refinance are paid back very quickly in savings each month. We'll help you determine which mortgage loan program is right for you, considering your cash on hand, how likely you are to sell your house in the near future, and the effect refinancing may have on your taxes. Call us at 2603382561 to get you started.

Curious about refinancing your home? Call us at 2603382561.

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