Is Refinancing Worth the Cost?
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Ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate is at least two points under your present rate? Perhaps several years ago that was sage advice, but since refinance costs have been getting lower, it could be a good time to take a serious look. A refinanced loan is often worth its cost many times over, because of the benefits that may come, along with a reduced interest rate.
Benefits from Refinancing
When you refinance, you might be able to lower your interest rate and mortgage payment amount, sometimes significantly. You might also be able to "cash out" a portion of the built-up equity in your home, that you can use to take care of higher interest debts, make home improvements, or finance a vacation. You may be able to refinance to a shorter-term mortgage loan, enabling you to build up your equity quicker.
Expenses and Fees
Of course, you'll have some fees and expenses during your the refinance process. With your refinance, you're paying for basically the same things you were charged for when you got your original mortgage. These might include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
You could offer to pay points (prepaid interest) to gain a lower rate of interest. The amount you'll save over the life of the mortgage might be significant if you've paid up front about 3% of the new loan balance. We recommend that you talk to a tax professional before acting on advice that these points paid can be deducted on your taxes.
Speaking of taxes, when your interest rate is reduced, it follows that you will also be lowering the interest amount that you'll be able to deduct on your taxes. This is another cost that some borrowers take into consideration. We can help you do the math! Call us at 2603382561.
Most people find that the monthly savings balance out the up-front expenses of refinancing. 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 near future, and your money on hand. Call us at 2603382561 to get started.
Want to know more about refinancing your home? Give us a call: 2603382561.