Is Refinancing Worth the Cost?
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Have you ever heard the old rule of thumb that says you should only consider refinancing if your new interest rate will be at least 2 points below your existing rate? That could have been valid years ago, but with the fact that refinancing has been costing less recently, it's never the wrong time to explore the options of a new loan! Refinancing has a variety of benefits that will often make it worth the up-front cost many times over.
Benefits from Refinancing
You may be able to lower your interest rate (sometimes significantly) and have smaller mortgage payments with your refinanced loan. Additionally, you may be given the option of pulling out some of your home equity by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you may also be able to build up home equity faster by switching to a shorter term mortgage.
The Cost
All these advantages do cost something, though. You will pay the same kinds of expenses and fees as you did with your current home loan. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might think about paying points to be given a better interest rate. When you pay (on average) three percent of the mortgage loan amount initially, your savings for the life of the new mortgage loan can be substantial. We recommend that you consult with a tax professional before acting on advice that the points paid may be deducted on your taxes.
Speaking of taxes, if you reduce your interest rate, naturally you will also be lowering the paid interest amount that you will be able to deduct from your taxes. This is one more cost that borrowers consider. We can help you do the math! Call us at 8165258000.
Ultimately, for most the total of initial costs to refinance will be made up soon in monthly savings. We can help you figure out what your options are, considering the effect a refinance could have on your taxes, how likely you might be to sell in the near future, and your cash on hand. Call us at 8165258000 to get you started.
Want to know more about refinancing? Call us at 8165258000.