Is Refinancing Worth the Cost?
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It has been said that only when your new interest will be at least 2 points lower, should you refinance your mortgage. That could have been good advice years ago, but with refinancing dropping in cost in recent years, it's a good time to explore the options of a new mortgage! A refinance is often worth its cost several times over, factoring in the advantages that it brings, as well as a reduced interest rate.
Benefits
You might be able to bring down your interest rate (sometimes by a lot) and have smaller monthly payments with your refinanced mortgage. You may also have the ability to "cash out" some of your equity, that you can use to consolidate debt, make home improvements, or take a vacation. With lower rates, you might also get the chance to build your home equity more quickly by switching to a shorter term loan.
The Cost
As you probably know, you'll have to pay for your process of refinancing. You will have the same types of expenses and fees as you did with your current mortgage. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You could need to pay discount points (prepaid interest) to get a lower interest rate. If you pay (on average) 3% of the loan amount up front, the savings for the life of the refinanced loan can be substantial. You might be told that these points can be deducted on your income taxes, but since tax regulations can be difficult to keep up with, we urge you to consult your tax professional before depending on this.
Another thing about taxes is that when you lower your interest rate, naturally you will also be lowering the interest amount that you'll be able to deduct on your taxes. This is another cost that borrowers take into account. We can help you do the math! Call us at 4702755627.
Most people find that the savings each month balance out the up-front expenses of refinancing. We'll help you find out which program is best for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing will probably have on your taxes. Call us at 4702755627 to get started.
Want to know more about refinancing? Give us a call at 4702755627.