When is Refinancing Worth it?
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It has been said that only if your new interest is at least 2 points lower, should you refinance your loan. Perhaps that was sound advice a number of years ago, but as refinance costs have been falling recently, it could be a good time to take a serious look. Refinancing has a variety of advantages that can make it worth the initial expenditure many times over.
Benefits from Refinancing
When you refinance, you may be able to reduce the interest rate and monthly payment amount, sometimes by a lot. You might also have the option to "cash out" some of your equity, that you will be able use to take care of higher interest debt, add on to your home, or take a vacation. With lower interest rates, you might also get the chance to build your home equity faster by moving to a shorter term mortgage loan.
Fees and Expenses
Of course, you will have some fees and expenses during the the refinance process. With your refinance, you're paying for basically the same things you paid for during your existing mortgage loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You could need to pay discount points (prepaid interest) to get a lower rate of interest. Your savings over the life of the mortgage loan may be significant if you've paid up front about three percent of the new loan balance. You might have heard that these points may be deducted on your income taxes, but as tax regulations are difficult to keep up with, please speak with a tax professional before depending on this.
Another cost that a borrower might consider is that a lower rate of interest will lower the interest amount you'll deduct on your federal income taxes. Call us at 754-202-4376 to help you do the math.
Most people find that the monthly savings outweigh the up-front expenses of a refinance. We can help you explore what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at 754-202-4376 to get started.
Want to know more about refinancing? Give us a call: 754-202-4376.