When is Refinancing Worth it?

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Some have said that only when your new interest will be at least two points below your current rate, should you refinance your mortgage. Perhaps several years ago that was good advice, but since refinance costs have been falling recently, it could be time to look into it. A refinance may be worth its cost several times over, because of the benefits that it brings, in addition to a reduced interest rate.

Benefits from Refinancing

You could be able to bring down your interest rate (sometimes significantly) and have smaller mortgage payments with your refinanced mortgage loan. You also may have the option of tapping into your home equity by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. With lower rates, you might also be able to build your home equity faster by moving to a shorter term loan.

The Cost

Of course, you will have to pay for the process of refinancing. With your refinance, you are paying for most of the same things you were charged for when you obtained your existing mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

Paying points can get you a lower interest rate. Your savings on the life of the mortgage loan might be substantial if you have paid up front about three percent of the new loan total. Please consult with a tax professional before acting on rumors that the points paid may be deducted on your federal income taxes.

Speaking of taxes, once you reduce your interest rate, naturally you will also be lowering the paid interest amount that you will be able to deduct from your taxes. This is one more expense that some borrowers take into consideration. Call us at 754-202-4376 to help you do the math.

All things considered, for most the total of up-front costs to refinance are paid back soon in monthly savings. We will work with you to determine which loan program is best 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 754-202-4376 to get started.

Curious about refinancing your home? Give us a call at 754-202-4376.

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