When is Refinancing Worth it?
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Ever hear the old rule of thumb that says you should only consider refinancing if the new interest rate is at least two points lower than your present one? Maybe several years ago that was good advice, but since refinance costs have been getting lower, it could be a good time to take a serious look. A refinanced loan can be worth its cost several times over, factoring in the benefits that can come, in addition to a reduced interest rate.
Benefits from Refinancing
When you refinance, you may have the ability to reduce the interest rate and monthly mortgage payment , perhaps considerably. You could also have the ability to "cash out" a portion of the built-up equity in your residence, which you may use to consolidate debts, make home improvements, or plan a vacation. You might be able to refinance to a shorter-term mortgage, enabling you to build up your home equity faster.
Expenses and Fees
As you probably expect, you will have some fees and expenses during the the refinance process. You'll pay the same kinds of expenses and fees as you did with your current home loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might need to pay discount points (prepaid interest) to gain a lower rate of interest. The money you'll save over the life of the mortgage might be substantial if you've paid up front about 3% of the new loan balance. You might be told that the points may be tax deductible, but since tax regulations are difficult to keep up with, please consult your tax professional before depending on this.
Another thing about taxes is that once you reduce your interest rate, it follows that you will also be reducing the interest amount that you'll be able to deduct on your taxes. This is one more expense that some borrowers take into account. Call us at 5122916100 to help you do the math.
Ultimately, for most the total of up-front costs to refinance are made up very quickly in savings each month. We'll work with you to figure out which mortgage loan program is the best fit for you, considering your cash on hand, how likely you are to sell your home in the near future, and how refinancing could effect your taxes. Call us at 5122916100 to get you started.
Want to know more about refinancing? Give us a call: 5122916100.