When is Refinancing Worth it?
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Some have said that only if your new interest is at least 2 points below your current rate, should you refinance your loan. Perhaps that was sound advice a number of years ago, but as refinance costs have been falling recently, it could be a good time to take a serious look. A refinance is often worth its cost many times over, considering the benefits that may come, in addition to a reduced interest rate.
When you refinance, you could have the ability to lower the interest rate and mortgage payment , sometimes considerably. You might also be able to "cash out" some of your equity, which you may use to take care of higher interest debts, improve your home, or finance a vacation. With reduced rates, you may also get the chance to build your home equity more quickly by moving to a shorter term loan.
Expenses and Fees
Of course, you'll have to pay for the the refinance process. With your refinance, you're paying for most of the same things you were charged for at the time you got your existing mortgage. Among these can be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Doing the Math
You might offer to pay discount points (prepaid interest) to gain a lower interest rate. Your savings on the life of the mortgage may be significant if you've paid up front about three percent of the new loan balance. You may have heard that these points may be tax deductible, but as tax regulations are difficult to keep up with, please consult with your tax professional before making decisions based on this.
Another thing about taxes is that once you bring down your interest rate, it follows that 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. Call us at 972.798.2110 to help you do the math.
Most people find that the savings each month balance out the initial cost of refinancing. We will help you determine which mortgage loan program is best for you, taking into account your cash on hand, how likely you are to sell your home in the near future, and how refinancing might effect your taxes. Call us at 972.798.2110 to get you started.
Curious about refinancing your home? Call us at 972.798.2110.