Is Refinancing Worth the Cost?
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It has been said that only in the case your new interest will be at least two points below your current rate, should you refinance your mortgage. That could have been accurate years ago, but as refinancing has been costing less in recent years, it's never the wrong time to consider a new loan! Refinancing has some advantages that often make it worth the initial expenditure many times over.
You may be able to lower your interest rate (sometimes by a lot) and make smaller monthly payments with a refinanced mortgage loan. You could also be able to "cash out" a portion of the built-up equity in your home, which you may use to consolidate debts, make home improvements, or plan a vacation. You might have the option to refinance to a shorter-term mortgage loan, giving you the ability to build your home equity quicker.
Expenses and Fees
All of these advantages do come with some expense, though. You will have the same types of fees as you did with your existing mortgage loan. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Do the Math
You could offer to pay discount points (prepaid interest) to gain a better rate of interest. When you pay (on average) 3% of the mortgage loan amount up front, the savings for the term of the new loan can be significant. You may hear that the points may be deducted on your income taxes, but since tax regulations are ever-changing, we urge you to consult a tax professional before considering this in your calculations.
Another thing about taxes is that when your interest rate is reduced, it follows that you'll also be reducing the paid interest amount that you will be able to deduct from your taxes. This is one more expense that borrowers consider. Call us at 954.920.9799 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 what your options are, considering the effect a refinance could have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at 954.920.9799 to get you started.
Curious about refinancing your home? Give us a call: 954.920.9799.