When is Refinancing Worth it?

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Have you ever heard the pearl of wisdom that says you should only refinance if the new interest rate is at least two points lower than your existing rate? 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 loan! Refinancing your mortgage loan has some benefits that can make it worth the initial expenditure a few times over.

Advantages

When you refinance, you might have the ability to reduce the interest rate and mortgage payment amount, sometimes by a lot. You also could be given the option of tapping into your home equity by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. With lower rates, you might also be able to build your home equity faster by switching to a shorter-term mortgage loan.

Fees and Expenses

All these advantages do come with some expense, though. You will have the same sort of expenses and fees as with your current mortgage. These may include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Do the Math

Paying points can result in a better interest rate. When you pay (on average) 3% of the mortgage loan amount at the start, the savings for the term of the refinanced mortgage loan can be substantial. We recommend that you consult a tax professional before acting on hear-say that any paid points can be deducted on your taxes.

An additional expense that borrowers may consider is that a reduced rate of interest will reduce the interest amount you'll be able to deduct from your federal income taxes. Call us at 866-840-8745 x2 to help you do the math.

Most people find that the monthly savings outweigh the up-front cost of a refinance. We can help you figure out your options, considering the effect a refinance may have on your taxes, how likely you might be to sell in the near future, and your cash on hand. Call us at 866-840-8745 x2 to get started.

Want to know more about refinancing? Call us: 866-840-8745 x2.

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