When is Refinancing Worth it?
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Searching for a loan? We'd be thrilled to answer your questions about your mortgage needs! Give us a call at 754-202-4376. Ready to begin? Apply Here.
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Have you ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate will be at least two points below your current one? Perhaps that was good advice a number of years ago, but as refinance costs have been falling recently, it could be a good time to look into it. A refinanced mortgage can be worth its cost many times over, because of the advantages that can come, along with a lower interest rate.
Advantages of Refinancing
You could be able to lower your interest rate (sometimes substantially) and reduce your monthly payment amount with a refinanced loan. You could also be able to "cash out" some of the built-up equity in your home, that you are able use to consolidate debt, improve your home, or plan a vacation. You might have the option to refinance to a shorter-term mortgage, giving you the ability to build your home equity quicker.
The Cost
All of these advantages do come with some expense, though. With your refinance, you are paying for basically the same things you were charged for at the time you obtained your original mortgage. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Do the Math
Paying points can help you attain a lower interest rate. If you pay (on average) 3% of the loan amount up front, the savings for the life of the new loan can be significant. You might hear that these points can be tax deductible, but as tax regulations are difficult to keep up with, we urge you to consult a tax professional before making any decisions based on this.
Speaking of taxes, if your interest rate is reduced, it follows that you will also be lowering the paid interest amount that you'll be able to deduct on your taxes. This is one more cost that borrowers consider. We can help you do the math! Call us at 754-202-4376.
In the end, for most borrowers the total of initial costs to refinance are paid back very quickly in monthly savings. We can help you figure out your options, considering the effect a refinance could have on your taxes, how likely you might be to sell in the next couple of years, and your cash on hand. Call us at 754-202-4376 to get started.
Want to know more about refinancing? Call us: 754-202-4376.