When is Refinancing Worth it?

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Some have said that only when your new interest will be at least two points below your current rate, should you refinance your mortgage. That may have been valid a while back, but with refinancing dropping in cost recently, it's never the wrong time to consider a new loan! Refinancing has various advantages that often make it worth the up-front expenditure a few times over.

Advantages

You could be able to lower your interest rate (sometimes significantly) and reduce your mortgage payment amount with your refinanced mortgage loan. You might also be able to "cash out" a portion of the built-up equity in your home, that you can use to consolidate debts, add on to your home, or finance a vacation. With lower rates, you might also get the chance to build up home equity more quickly by changing to a shorter-term loan.

Expenses and Fees

Of course, you'll have to pay for the the refinance process. When you refinance, you're paying for a lot of the same things you were charged for during your existing mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You could offer to pay points (prepaid interest) to get a more favorable interest rate. If you pay (on average) three percent of the mortgage loan amount initially, your savings for the term of the refinanced mortgage loan can be substantial. Please consult a tax professional before acting on advice that any points paid can be deducted on your taxes.

An additional cost that borrowers may take into account is that a reduced rate of interest will reduce the interest amount you will deduct from your federal income taxes. We can help you do the math! Call us at 3038627760.

In the end, for most people the amount of initial costs to refinance will be paid back very quickly in savings each month. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, how likely you might be to sell in the next couple of years, and your cash on hand. Call us at 3038627760 to get you started.

Curious about refinancing? Give us a call at 3038627760.