Is Refinancing Worth the Cost?
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It has been said that only if your new interest will be at least 2 points lower, should you refinance your mortgage. Maybe several years ago that was sage advice, but as refinance costs have been getting lower, it could be time to look into it. A refinanced mortgage loan is often worth its cost many times over, because of the advantages that it brings, as well as a reduced interest rate.
Benefits from Refinancing
You may be able to lower your interest rate (sometimes substantially) and make smaller mortgage payments with your refinanced mortgage loan. You might also have the option to "cash out" a portion of your home equity, which you can use to take care of higher interest debts, add on to your home, or take a vacation. With reduced rates, you may also get the chance to build your home equity more quickly by moving to a shorter term mortgage.
The Cost
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 paid for during your original mortgage. These can include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
Paying points can help you attain a better interest rate. If you pay (on average) 3% of the mortgage loan amount initially, your savings for the life of the refinanced loan can be substantial. You may have heard that the points may be deducted on your income taxes, but as tax regulations are ever-changing, we urge you to consult a tax professional before making any decisions based on this.
Another thing about taxes is that if your interest rate is reduced, of course you'll also be lowering the interest amount that you can deduct on your taxes. This is another expense that some borrowers consider. Call us at 800-374-0046 to help you do the math.
Ultimately, for most people the amount of initial costs to refinance are paid back soon in savings each month. We will work with you to determine what program is the best fit for you, looking at your cash on hand, how likely you are to sell your residence in the next few years, and the effect refinancing might have on your taxes. Call us at 800-374-0046 to get started.
