When is Refinancing Worth it?
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It has been said that only when your new interest is at least two points lower, should you refinance your mortgage. Maybe that was good advice a number of years ago, but as refinance costs have been falling recently, it may be time to look into it. Refinancing has a number of advantages that will often make it worth the initial cost several times over.
When you refinance, you might have the ability to lower your interest rate and monthly payment , sometimes by a lot. You might also be able to "cash out" some of your home equity, that you may use to take care of higher interest debts, add on to your home, or take a vacation. You could have the option to refinance to a shorter-term mortgage, giving you the ability to add to your home equity faster.
Fees and Expenses
All of these advantages do cost something, though. When you refinance, you're paying for basically the same things you were charged for at the time you got your original mortgage loan. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
Paying discount points can result in a lower interest rate. The money you'll save over the life of the loan might be significant if you've paid up front about three percent of the new loan balance. You may have heard that the points can be deducted on your income taxes, but since tax regulations can be ever-changing, we urge you to consult with a tax professional before depending on this.
Another thing about taxes is that if your interest rate is lowered, it follows that you'll also be lowering the interest amount that you can deduct on your federal income taxes. This is another expense that borrowers consider. Call us at 561-395-4264 to help you do the math.
Most people find that the monthly savings quickly outweigh the up-front expenses of a refinance. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at 561-395-4264 to get started.
Want to know more about refinancing? Call us at 561-395-4264.