When is Refinancing Worth it?
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Some have said that only when your new interest is at least 2 points below your current rate, should you refinance your loan. That could have been valid a while back, but with the fact that refinancing has been costing less in recent years, it is a good time to think about a new mortgage loan! A refinanced mortgage loan can be worth its cost several times over, because of the benefits that can come, as well as a reduced interest rate.
You might be able to bring down your interest rate (sometimes substantially) and make smaller monthly payments with a refinanced mortgage loan. You could also have the ability to "cash out" a portion of your equity, that you can use to consolidate debts, make home improvements, or plan a vacation. With reduced interest rates, you might also get the chance to build up home equity faster by changing to a shorter term mortgage.
Expenses and Fees
All of these benefits do come with some expense, though. With your refinance, you're paying for basically the same things you paid for during your existing mortgage. These could include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Doing the Math
You might look into paying points to get a lower interest rate. If you pay (on average) three percent of the mortgage loan amount at the start, your savings for the term of the refinanced loan can be significant. You might have heard that the points may be tax deductible, but since tax regulations can be ever-changing, we urge you to consult a tax professional before considering this in your calculations.
Speaking of taxes, once your interest rate is reduced, of course you'll also be reducing the paid interest amount that you'll be able to deduct on your taxes. This is one more expense that some borrowers consider. We can help you do the math! Call us at 6507631924.
Most borrowers find that the savings per month quickly outweigh the up-front cost of a refinance. We can help you find out what your options are, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 6507631924 to get you started.
Curious about refinancing? Call us at 6507631924.