When is Refinancing Worth it?
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Ever heard the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least two points under your present rate? Maybe that was good advice several years ago, but as refinance costs have been getting lower, it may be time to take a serious look. A refinance is often worth its cost several times over, factoring in the advantages that come, in addition to a reduced interest rate.
Benefits from Refinancing
You may be able to lower your interest rate (sometimes significantly) and reduce your monthly payment amount with a refinanced mortgage loan. You also might have the option of tapping into the equity in your home by "cashing out" some money to renovate your home, consolidate debt, or take your family on a vacation. You might be able to refinance into a shorter-term mortgage program, giving you the ability to build your home equity faster.
Of course, you'll have some fees and expenses during your the refinance process. When you refinance, you're paying for basically the same things you were charged for during your original mortgage. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Do the Math
You might investigate paying points to be given a reduced interest rate. The amount you will save on the life of the mortgage loan could be significant if you have paid up front about three percent of the new loan balance. Please talk to a tax professional before acting on advice that the paid points can be deducted on your taxes.
Speaking of taxes, when your interest rate is lowered, of course you will also be lowering the interest amount that you'll be able to deduct from your taxes. This is one more cost that some borrowers take into consideration. Call us at 651-209-2900 to help you do the math.
Most borrowers find that the savings per month outweigh the initial expenses of a refinance. We'll work with you to determine what mortgage program is best for you, considering your cash on hand, how likely you are to sell your house in the next few years, and the effect refinancing may have on your taxes. Call us at 651-209-2900 to get you started.