When is Refinancing Worth it?
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Ever heard the old rule of thumb that states you should only consider refinancing if your new interest rate is at least 2 points lower than your existing rate? Maybe several years ago that was good advice, but since refinance costs have been getting lower, it could be a good time to look into it. Refinancing has a number of advantages that can make it worth the initial expenditure a few times over.
Benefits
When you refinance, you might have the ability to reduce your interest rate and monthly payment , perhaps by a lot. You may also have the option to "cash out" a portion of your equity, that you are able use to take care of higher interest debts, make home improvements, or finance a vacation. With reduced rates, you may also be able to build up home equity more quickly by moving to a shorter term loan.
Expenses and Fees
All these benefits do come with some expense, though. With your refinance, you are paying for basically the same things you paid for during your original mortgage loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
You could need to pay points (prepaid interest) to attain a better interest rate. If you pay (on average) 3% of the mortgage loan amount up front, the savings for the term of the refinanced mortgage loan can be substantial. We recommend that you consult a tax professional before acting on advice that any paid points can be deducted on your federal income taxes.
Another thing about taxes is that when your interest rate is lowered, of course you will also be lowering the paid interest amount that you'll be able to deduct from your taxes. This is one more expense that some borrowers take into account. We can help you do the math! Call us at 6507631924.
Ultimately, for most people the total of initial costs to refinance are made up soon in monthly savings. We will help you determine what mortgage loan program is perfect for you, looking at your cash on hand, the likelihood of selling your residence in the near future, and the effect refinancing will have on your taxes. Call us at 6507631924 to get you started.
Want to know more about refinancing your home? Call us at 6507631924.