Is Refinancing Worth the Cost?
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Ever hear the pearl of wisdom that says you should only refinance if the new interest rate is at least two points under your current one? Perhaps that was sound advice a number of years ago, but as refinance costs have been getting lower, it may be time to look into it. A refinanced mortgage is often worth its cost many times over, factoring in the advantages that it brings, in addition to a reduced interest rate.
Benefits from Refinancing
When you refinance, you could be able to reduce your interest rate and monthly mortgage payment amount, perhaps significantly. You might also be able to "cash out" some of your home equity, that you will be able use to take care of higher interest debt, add on to your home, or take a vacation. You might have the option to refinance to a shorter-term mortgage loan, giving you the ability to build your home equity faster.
Expenses and Fees
As you probably expect, you will have to pay for your the refinance process. You will pay the same sort of fees as you did with your present mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might investigate paying points to receive a reduced interest rate. When you pay (on average) three percent of the loan amount at the start, your savings for the life of the new loan can be significant. You might hear that the points can be deducted on your income taxes, but because tax regulations can be difficult to keep up with, please consult with a tax professional before considering this in your calculations.
Speaking of taxes, once you lower your interest rate, it follows that you will also be reducing the interest amount that you may deduct on your taxes. This is another expense that some borrowers take into account. Call us at (303) 862-7760 to help you do the math.
Ultimately, for most borrowers the total of up-front costs to refinance are made up soon in savings each month. We'll work with you to determine what mortgage loan program is the ideal fit for you, considering your cash on hand, the likelihood of selling your home in the next few years, and the effect refinancing could have on your taxes. Call us at (303) 862-7760 to get started.
Curious about refinancing your home? Give us a call: (303) 862-7760.