When is Refinancing Worth it?

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Some have said that only if your new interest will be at least 2 points under your current rate, should you refinance your mortgage. That could have been valid years ago, but with refinancing dropping in cost in recent years, it's a good time to think about a new loan! Refinancing your mortgage has a number of advantages that will often make it worth the up-front expenditure a few times over.

Benefits

When you refinance, you might have the ability to lower your interest rate and monthly mortgage payment amount, perhaps significantly. You also may have the option of pulling out some of your home equity by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. You may be able to refinance into a shorter-term mortgage loan, giving you the ability to build up your equity quicker.

Fees and Expenses

All of these advantages do come with some expense, though. When you refinance, you are paying for basically the same things you paid for during your original mortgage loan. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.

Do the Math

You might think about paying points to be given a reduced interest rate. The money you will save on the life of the loan may be substantial if you've paid up front about 3% of the new loan total. Please consult with a tax professional before acting on advice that any paid points can be deducted on your taxes.

Speaking of taxes, if your interest rate is lowered, of course you'll also be lowering the interest amount that you'll be able to deduct from your taxes. This is another cost that some borrowers take into consideration. Call us at 754-202-4376 to help you do the math.

In the end, for most people the amount of up-front costs to refinance are made up very quickly in savings each month. We can help you explore your options, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at 754-202-4376 to get started.

Want to know more about refinancing your home? Call us: 754-202-4376.

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