When is Refinancing Worth it?
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It has been said that only in the case your new interest is 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. A refinance can be worth its cost several times over, considering the benefits that it brings, as well as a reduced interest rate.
You might be able to lower your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with a refinanced loan. Additionally, you might be given the option of tapping into the equity in your house by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. You could be able to refinance to a shorter-term mortgage program, enabling you to add to your equity faster.
Expenses and Fees
All of these benefits do cost something, though. You'll have to pay the same types of fees as with your current mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might think about paying points to reduce your interest rate. Your savings on the life of the mortgage could be substantial 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 rumors that any paid points can be deducted on your federal income taxes.
Another thing about taxes is that if you reduce your interest rate, of course you will also be reducing the paid interest amount that you may deduct on your taxes. This is one more cost that borrowers take into account. Call us at (816) 525-8000 to help you do the math.
Ultimately, for most people the amount of up-front costs to refinance will be paid back very quickly in savings each month. We will work with you to find out which mortgage loan program is the right fit for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and how refinancing may effect your taxes. Call us at (816) 525-8000 to get you started.
Curious about refinancing? Call us at (816) 525-8000.
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