Is Refinancing Worth the Cost?
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Ever heard the pearl of wisdom that states you should only refinance if your new interest rate will be at least 2 points below your existing rate? Maybe several years ago that was wise advice, but since refinance costs have been getting lower, it could be time to look into it. A refinanced mortgage loan can be worth its cost many times over, because of the advantages that it brings, along with a reduced interest rate.
Benefits from Refinancing
You may be able to bring down your interest rate (sometimes significantly) and reduce your mortgage payment amount with your refinanced loan. You could also be able to "cash out" a portion of your equity, that you can use to take care of higher interest debt, make home improvements, or finance a vacation. With lower rates, you might also be able to build your home equity faster by switching to a shorter-term mortgage loan.
Fees and Expenses
Of course, you'll have some fees and expenses during your process of refinancing. When you refinance, you're paying for basically the same things you were charged for during your original mortgage. These might include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Doing the Math
Paying points can result in a better interest rate. The amount you'll save on the life of the loan might be significant if you've paid up front about three percent of the new loan total. Please talk to a tax professional before acting on hear-say that the points paid may be deducted on your federal income taxes.
Another thing about taxes is that once your interest rate is lowered, of course you will also be reducing the paid interest amount that you'll be able to deduct from your taxes. This is one more cost that some borrowers consider. Call us at 603-893-6616 to help you do the math.
Most borrowers find that the monthly savings balance out the initial cost of a refinance. We'll help you determine which mortgage loan program is right for you, looking at your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing could have on your taxes. Call us at 603-893-6616 to get you started.
Curious about refinancing? Call us at 603-893-6616.