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 could have been valid a while back, but with refinancing dropping in cost in recent years, it's never the wrong time to consider a new mortgage! Refinancing has a variety of advantages that often make it worth the initial expenditure a few times over.
You might be able to lower your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with a refinanced mortgage loan. You also might have the option of pulling out some of your home equity by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also get the chance to build up home equity faster by moving to a shorter term loan.
Fees and Expenses
All of these advantages do cost something, though. You will have the same types of expenses and fees as you did with your existing home loan. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You could need to pay discount points (prepaid interest) to get a more favorable rate of interest. The amount you will save on the life of the mortgage loan could be significant if you have paid up front about three percent of the new loan balance. You may hear that points can be tax deductible, but because tax regulations can be ever-changing, please speak with your tax professional before considering this in your calculations.
Another thing about taxes is that once your interest rate is reduced, of course you'll also be lowering the interest amount that you will be able to deduct from your taxes. This is one more expense that borrowers take into account. We can help you do the math! Call us at 5626935048.
All things considered, for most borrowers the total of up-front costs to refinance are paid back very quickly in monthly savings. We can help you explore what your options are, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at 5626935048 to get you started.
Want to know more about refinancing your home? Give us a call: 5626935048.