When is Refinancing Worth it?

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Some have said that only when your new interest will be at least 2 points lower, should you refinance your loan. That might have been accurate a while back, but since refinancing has been costing less over the last few years, it's a good time to think about a new loan! A refinanced mortgage loan is often worth its cost many times over, because of the benefits that come, as well as a reduced interest rate.

Advantages of Refinancing

When you refinance, you could have the ability to lower the interest rate and mortgage payment amount, perhaps considerably. You also may have the option of tapping into the equity in your home by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. With lower rates, you may also get the chance to build your home equity more quickly by changing to a shorter-term mortgage.

The Cost

Of course, you'll have to pay for the process of refinancing. When you refinance, you're paying for most of the same things you were charged for at the time you obtained your current mortgage loan. These could include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Doing the Math

You might investigate paying points to reduce your interest rate. If you pay (on average) 3% of the mortgage loan amount initially, your savings for the life of the refinanced mortgage can be great. We recommend that you consult with a tax professional before acting on hear-say that any points paid can be deducted on your federal income taxes.

Another cost that a borrower may consider is that a reduced interest rate will reduce the interest amount you will deduct from your federal income taxes. We can help you do the math! Call us at (512) 291-6100.

In the end, for most borrowers the amount of initial costs to refinance will be paid back soon in savings each month. We'll help you find out what program is ideal for you, considering your cash on hand, the likelihood of selling your house in the next few years, and the effect refinancing will probably have on your taxes. Call us at (512) 291-6100 to get started.

Want to know more about refinancing? Give us a call: (512) 291-6100.

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