When is Refinancing Worth it?
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Ever heard the pearl of wisdom that states you should only refinance if the new interest rate will be at least 2 points under your current one? Perhaps that was sound advice several years ago, but as refinance costs have been getting lower, it could be a good time to take a serious look. A refinanced loan may be worth its cost several times over, because of the advantages that it brings, as well as a lower interest rate.
When you refinance, you might have the ability to lower the interest rate and monthly mortgage payment , sometimes significantly. You might also have the option to "cash out" some of your home equity, which you may use to consolidate debt, improve your home, or take a vacation. With lower rates, you might also be able to build your home equity more quickly by changing to a shorter term loan.
Expenses and Fees
Of course, you'll have some fees and expenses during your the refinance process. With your refinance, you are paying for many of the same things you paid for at the time you obtained your existing mortgage. These could include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
Paying points can result in a lower interest rate. When you pay (on average) 3% of the loan amount initially, the savings for the life of the refinanced mortgage can be significant. You might be told that these points can be deducted on your income taxes, but because tax regulations are ever-changing, please consult with your tax professional before making any decisions based on this.
An additional expense that borrowers may take into account is that a lower rate of interest will lower the interest amount you will be able to deduct from your federal income taxes. Call us at 754-202-4376 to help you do the math.
Most borrowers find that the monthly savings balance out the initial cost of a refinance. We'll work with you to determine which mortgage program is best for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing could effect your taxes. Call us at 754-202-4376 to get started.
Curious about refinancing your home? Call us at 754-202-4376.