When is Refinancing Worth it?

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Ever heard the old rule of thumb that states you should only refinance if the new interest rate is at least 2 points below your present rate? That could have been valid years ago, but with refinancing dropping in cost in recent years, it is a good time to consider a new mortgage loan! A refinance may be worth its cost several times over, factoring in the benefits that come, as well as a lower interest rate.

Advantages

You might be able to bring down your interest rate (sometimes substantially) and have smaller mortgage payments with a refinanced mortgage. Additionally, you might have the option of tapping into the equity in your property by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also be able to build up home equity faster by switching to a shorter term mortgage loan.

The Cost

Of course, you'll have to pay for your the refinance process. With your refinance, you're paying for basically the same things you paid for when you got your original mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might look into paying points to receive a lower interest rate. When you pay (on average) three percent of the loan amount initially, the savings for the term of the new mortgage loan can be great. You might hear that these points may be tax deductible, but since tax regulations are ever-changing, we urge you to speak with your tax professional before considering this in your calculations.

Another cost that borrowers might consider is that a reduced 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 8165258000.

Most borrowers find that the savings per month outweigh the up-front expenses of refinancing. We will work with you to find out which loan program is the right fit for you, looking at your cash on hand, how likely you are to sell your home in the next few years, and how refinancing may effect your taxes. Call us at 8165258000 to get you started.

Curious about refinancing your home? Give us a call at 8165258000.

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