Is Refinancing Worth the Cost?
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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. Perhaps that was good advice a number of years ago, but as refinance costs have been falling recently, it may be a good time to take a serious look. Refinancing has a variety of advantages that can make it worth the initial cost a few times over.
You might be able to lower your interest rate (sometimes substantially) and have smaller mortgage payments with your refinanced mortgage loan. You may also have the option to "cash out" a portion of the built-up equity in your home, which you are able use to consolidate debt, make home improvements, or take a vacation. You may be able to refinance into a shorter-term mortgage program, enabling you to add to your equity quicker.
All of these benefits do come with some expense, though. When you refinance, you are paying for most of the same things you paid for when you obtained your existing mortgage. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
Paying points can result in a better interest rate. Your savings over the life of the loan may be significant if you have paid up front about three percent of the new loan total. Please consult with a tax professional before acting on advice that these points paid can be deducted on your federal income taxes.
Speaking of taxes, when you lower your interest rate, naturally you will also be lowering the paid interest amount that you can deduct on your federal income taxes. This is another cost that borrowers take into account. We can help you do the math! Call us at 603-893-6616.
In the end, for most the total of up-front costs to refinance will be made up very quickly in monthly savings. We will help you figure out which program is right for you, looking at your cash on hand, how likely you are to sell your home in the next few years, and the effect refinancing may have on your taxes. Call us at 603-893-6616 to get started.
Curious about refinancing your home? Call us: 603-893-6616.