When is Refinancing Worth it?
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It has been said that only in the case your new interest is at least 2 points under your current rate, should you refinance your loan. That could have been true years ago, but with refinancing dropping in cost over the last few years, it is a good time to consider a new mortgage loan! Refinancing your mortgage has a number of advantages that often make it worth the up-front expenditure many times over.
Advantages
When you refinance, you could be able to reduce your interest rate and monthly mortgage payment amount, sometimes considerably. You also might have the option of pulling out some of the equity in your house by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. You could be able to refinance to a shorter-term mortgage, enabling you to build up your equity faster.
The Cost
As you probably expect, you will have some fees and expenses during the process of refinancing. When you refinance, you are paying for many of the same things you were charged for at the time you obtained your original mortgage. Among these can be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
You might look into paying points to reduce your interest rate. When you pay (on average) 3% of the loan amount at the start, your savings for the term of the new loan can be great. Please consult a tax professional before acting on hear-say that any paid points can be deducted on your federal income taxes.
An additional cost that a borrower may take into account is that a lower rate of interest will reduce the interest amount you'll deduct on your taxes. Call us to help you do the math.
In the end, for most the amount of initial costs to refinance are made up very quickly in monthly savings. We will help you figure out what mortgage loan program is perfect for you, taking into account your cash on hand, the likelihood of selling your house in the near future, and what effect refinancing may have on your taxes.
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