Is Refinancing Worth the Cost?
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Shopping for a mortgage? We will be glad to help! Give us a call today at 866-300-1550. Ready to begin? Apply Here.
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Ever hear the old rule of thumb that says you should only refinance if your new interest rate will be at least two points below your present one? Maybe several years ago that was sage advice, but since refinance costs have been falling recently, it may be time to take a serious look. A refinanced mortgage loan can be worth its cost several times over, because of the benefits that can come, along with a lower interest rate.
Advantages
You might 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" some of the built-up equity in your home, that you can use to take care of higher interest debt, improve your home, or plan a vacation. You could have the option to refinance to a shorter-term mortgage, enabling you to build up your home equity quicker.
Expenses and Fees
All of these benefits do cost something, though. You'll have to pay the same kinds of fees as you did with your existing home loan. These can include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
You might offer to pay points (prepaid interest) to gain a more favorable rate of interest. If you pay (on average) three percent of the loan amount initially, your savings for the term of the refinanced mortgage loan can be substantial. You might hear that the points may be tax deductible, but because tax regulations can be difficult to keep up with, please consult a tax professional before making decisions based on this.
Speaking of taxes, once you reduce your interest rate, it follows that you will also be lowering the paid interest amount that you may deduct from your federal income taxes. This is another cost that borrowers take into consideration. We can help you do the math! Call us at 866-300-1550.
Most borrowers find that the savings each month balance out the up-front cost of a refinance. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your money on hand. Call us at 866-300-1550 to get started.
Curious about refinancing? Call us at 866-300-1550.