When is Refinancing Worth it?
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Have you ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate is at least two points lower than your existing rate? That may have been accurate a while back, but with the fact that refinancing has been costing less in recent years, it's a good time to think about a new mortgage loan! Refinancing your loan has various advantages that often make it worth the initial cost a few times over.
Benefits
When you refinance, you may have the ability to reduce the interest rate and monthly mortgage payment , perhaps significantly. You may also have the option to "cash out" a portion of your equity, that you may use to take care of higher interest debt, improve your home, or finance a vacation. You may have the option to refinance to a shorter-term mortgage program, enabling you to build your home equity quicker.
Expenses and Fees
All of these advantages do cost something, though. You will have to pay the same types of expenses and fees as with your current mortgage. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might think about paying points to receive a reduced interest rate. Your savings over the life of the mortgage might be significant if you have paid up front about 3% of the new loan balance. We recommend that you consult with a tax professional before acting on rumors that any paid points can be deducted on your federal income taxes.
One more expense that a borrower may consider is that a lower interest rate will lower the interest amount you will deduct from your taxes. Call us at to help you do the math.
All things considered, for most the amount of up-front costs to refinance are paid back soon in savings each month. We will help you find out what mortgage program is best for you, taking into account your cash on hand, the likelihood of selling your house in the near future, and how refinancing will effect your taxes. Call us at to get started.
Curious about refinancing your home? Give us a call: .