When is Refinancing Worth it?
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It has been said that only when your new interest will be at least two points lower, should you refinance your mortgage. That may have been true a while back, but with refinancing dropping in cost recently, it is never the wrong time to explore the options of a new loan! A refinanced mortgage can be worth its cost several times over, considering the advantages that may come, in addition to a lower interest rate.
When you refinance, you may have the ability to lower the interest rate and monthly mortgage payment amount, sometimes considerably. You could also be able to "cash out" a portion of your equity, which you can use to consolidate debts, make home improvements, or take a vacation. With reduced rates, you may also get the chance to build your home equity faster by changing to a shorter-term loan.
Fees and Expenses
Of course, you will have to pay for the the refinance process. When you refinance, you are paying for many of the same things you were charged for during your current mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might consider paying points to receive a lower interest rate. Your savings on the life of the mortgage may be significant if you've paid up front about 3% of the new loan balance. You may hear that these points can be tax deductible, but as tax regulations are ever-changing, please speak with your tax professional before considering this in your calculations.
An additional expense that a borrower may take into account is that a reduced interest rate will lower the interest amount you'll deduct on your taxes. Call us at 478-474-4600 to help you do the math.
All things considered, for most borrowers the amount of initial costs to refinance are made up very quickly in savings each month. We can help you explore 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 478-474-4600 to get started.