When is Refinancing Worth it?
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It has been said that only when your new interest will be at least two points below your current rate, should you refinance your loan. That may have been valid years ago, but since refinancing has been costing less recently, it is never the wrong time to consider a new mortgage loan! Refinancing your mortgage has some advantages that can make it worth the initial cost a few times over.
When you refinance, you might have the ability to lower your interest rate and mortgage payment , perhaps by a lot. You also could have the option of pulling out some of the equity in your house by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. With lower interest rates, you may also be able to build up home equity more quickly by switching to a shorter term mortgage.
As you probably expect, you'll have to pay for your process of refinancing. With your refinance, you are paying for most of the same things you paid for when you obtained your current mortgage loan. These can include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
You could need to pay discount points (prepaid interest) to attain a better rate of interest. When you pay (on average) three percent of the mortgage loan amount initially, the savings for the life of the new mortgage loan can be substantial. You may be told that these points may be deducted on your income taxes, but because tax regulations are difficult to keep up with, we urge you to consult with your tax professional before making decisions based on this.
An additional expense that a borrower might consider is that a lower interest rate will reduce the interest amount you'll deduct on your federal income taxes. We can help you do the math! Call us at 6233400934.
In the end, for most borrowers the amount of initial costs to refinance are made up very quickly in savings each month. We can help you explore what your options are, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at 6233400934 to get you started.
Want to know more about refinancing your home? Give us a call at 6233400934.