When is Refinancing Worth it?
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It has been said that only if your new interest is at least 2 points lower, should you refinance your loan. Maybe several years ago that was good advice, but as refinance costs have been falling recently, it may be a good time to look into it. Refinancing your mortgage loan has a variety of advantages that will often make it worth the initial cost many times over.
Benefits
You may be able to lower your interest rate (sometimes by a lot) and have smaller monthly payments with your refinanced mortgage loan. Additionally, you might have the option of pulling out some of the equity in your house by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. With lower rates, you might also get the chance to build up home equity faster by changing to a shorter-term mortgage loan.
Expenses and Fees
All these advantages do come with some expense, though. You will have the same types of expenses and fees as with your current home loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on. Ask about a low cost refinance too! It can make your break even period almost immediate!
Doing the Math
Paying points can help you get a lower interest rate. The money you'll save over the life of the mortgage loan could be significant if you have paid up front about 3% of the new loan balance. You may have heard that these points may be tax deductible, but because tax regulations can be ever-changing, we urge you to consult with a tax professional before depending on this.
Speaking of taxes, if you bring down your interest rate, of course you'll also be lowering the paid interest amount that you'll be able to deduct from your federal income taxes. This is another expense that borrowers take into account. Call us at (303) 931-7879 to help you do the math.
In the end, for most borrowers the total of up-front costs to refinance are paid back very quickly in savings each month. We'll help you figure out which mortgage program is best for you, looking at your cash on hand, how likely you are to sell your residence in the next few years, and what effect refinancing may have on your taxes. Call us at (303) 931-7879 to get you started.
Want to know more about refinancing? Call us at (303) 931-7879.