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 is at least two points under your existing one? Maybe several years ago that was wise advice, but as refinance costs have been getting lower, it could be a good time to look into it. A refinance may be worth its cost several times over, because of the advantages that may come, as well as a lower interest rate.
Advantages of Refinancing
You might be able to bring down your interest rate (sometimes substantially) and make smaller monthly payments with your refinanced mortgage. You also might have the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. You might have the option to refinance into a shorter-term mortgage loan, giving you the ability to add to your equity quicker.
The Cost
As you probably expect, you'll have some fees and expenses during the the refinance process. You will have the same types of expenses and fees as you did with your present mortgage loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
Paying discount points can get you a better interest rate. If you pay (on average) three percent of the mortgage loan amount initially, the savings for the term of the refinanced mortgage loan can be great. We recommend that you talk to a tax professional before acting on advice that the points paid may be deducted on your federal income taxes.
An additional expense that borrowers might take into account is that a lower rate of interest will reduce the interest amount you'll deduct on your federal income taxes. Call us at to help you do the math.
Most people find that the savings each month quickly outweigh the up-front expenses of refinancing. We can help you find out your options, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the next couple of years, and your money on hand. Call us at to get you started.
Curious about refinancing your home? Call us at .