Is Refinancing Worth the Cost?
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Searching for mortgage advice? We'd be thrilled to talk about our many mortgage solutions! Give us a call today at 1-800-606-2794. Ready to get started? Apply Now.
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Ever hear the old rule of thumb that states you should only consider refinancing if the new interest rate will be at least 2 points lower than your existing one? Maybe several years ago that was sage advice, but since refinance costs have been getting lower, it could be time to take a serious look. A refinanced loan may be worth its cost several times over, considering the advantages that may come, in addition to a lower interest rate.
Benefits from Refinancing
When you refinance, you may be able to lower your interest rate and monthly mortgage payment amount, sometimes significantly. Additionally, you might have the option of pulling out some of your home equity by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you may also be able to build your home equity faster by moving to a shorter-term mortgage.
Fees and Expenses
All of these benefits do come with some expense, though. You'll have to pay the same kinds of fees as with your current mortgage loan. These can include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
You could offer to pay points (prepaid interest) to attain a more favorable rate of interest. Your savings over the life of the loan may be substantial if you have paid up front about three percent of the new loan total. Please talk to a tax professional before acting on advice that any paid points may be deducted on your taxes.
Speaking of taxes, if your interest rate is reduced, it follows that you'll also be lowering the paid interest amount that you will be able to deduct on your federal income taxes. This is one more cost that borrowers take into consideration. We can help you do the math! Call us at 1-800-606-2794.
In the end, for most people the total of up-front costs to refinance are made up soon 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 may be to sell in the next couple of years, and your available cash. Call us at 1-800-606-2794 to get you started.
Want to know more about refinancing? Give us a call: 1-800-606-2794.