When is Refinancing Worth it?

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Have you ever heard the pearl of wisdom that states you should only refinance if the new interest rate will be at least 2 points under your existing one? Maybe several years ago that was wise advice, but as refinance costs have been falling recently, it could be a good time to take a serious look. Refinancing has a variety of advantages that will often make it worth the initial expenditure a few times over.

Advantages

You may be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with your refinanced mortgage loan. You may also have the ability to "cash out" a portion of your equity, which you may use to take care of higher interest debt, improve your home, or plan a vacation. With lower interest rates, you may also be able to build your home equity faster by moving to a shorter-term mortgage loan.

Expenses and Fees

As you probably know, you'll have to pay for your process of refinancing. You will pay the same sort of expenses and fees as with your present mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might think about paying points to reduce your interest rate. Your savings over the life of the mortgage loan might be substantial if you've paid up front about 3% of the new loan balance. We recommend that you talk to a tax professional before acting on rumors that any paid points can be deducted on your federal income taxes.

An additional expense that a borrower might consider is that a reduced interest rate will reduce the interest amount you will deduct on your taxes. We can help you do the math! Call us at 7133252099.

Most people find that the monthly savings quickly outweigh the up-front cost of refinancing. We will help you determine what loan program is right for you, taking into account your cash on hand, the likelihood of selling your house in the next few years, and what effect refinancing might have on your taxes. Call us at 7133252099 to get you started.

Curious about refinancing your home? Give us a call: 7133252099.

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