Is Refinancing Worth the Cost?
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It has been said that only if your new interest is at least two points below your current rate, should you refinance your loan. Maybe several years ago that was good advice, but as refinance costs have been getting lower, it could be time to look into it. Refinancing has some advantages that can make it worth the up-front expenditure many times over.
Benefits from Refinancing
When you refinance, you might have the ability to reduce the interest rate and mortgage payment , sometimes significantly. You could also be able to "cash out" a portion of the built-up equity in your home, which you are able use to take care of higher interest debt, make home improvements, or plan a vacation. You may be able to refinance to a shorter-term mortgage loan, enabling you to add to your home equity faster.
Fees and Expenses
All of these advantages do cost something, though. With your refinance, you're paying for basically the same things you were charged for when you obtained your existing mortgage. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Doing the Math
You could need to pay discount points (prepaid interest) to get a better interest rate. Your savings on the life of the mortgage could be substantial if you have paid up front about three percent of the new loan balance. You may be told that points may be deducted on your income taxes, but because tax regulations are difficult to keep up with, we urge you to consult a tax professional before considering this in your calculations.
An additional expense that borrowers might consider is that a lower rate of interest will reduce the interest amount you'll deduct on your taxes. Call us at 8165258000 to help you do the math.
In the end, for most the amount of up-front costs to refinance are paid back soon in monthly savings. We can help you explore your options, considering the effect a refinance could have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at 8165258000 to get you started.
Curious about refinancing your home? Call us at 8165258000.
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