When is Refinancing Worth it?
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Ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate is at least two points under your current one? Maybe that was good advice several years ago, but as refinance costs have been getting lower, it could be time to look into it. A refinance is often worth its cost many times over, factoring in the advantages that it brings, in addition to a reduced interest rate.
You might be able to lower your interest rate (sometimes substantially) and make smaller monthly payments with a refinanced mortgage loan. You could also have the ability to "cash out" some of the built-up equity in your residence, which you can use to take care of higher interest debt, improve your home, or plan a vacation. With lower rates, you may also be able to build your home equity faster by changing to a shorter term mortgage.
Expenses and Fees
As you probably expect, you'll have some fees and expenses during the the refinance process. When you refinance, you are paying for basically the same things you were charged for when you obtained your current mortgage loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You could offer to pay points (prepaid interest) to gain a lower interest rate. If you pay (on average) three percent of the mortgage loan amount initially, your savings for the life of the refinanced mortgage loan can be great. You might hear that points may be tax deductible, but since tax regulations can be difficult to keep up with, please consult with your tax professional before considering this in your calculations.
Speaking of taxes, when your interest rate is reduced, it follows that you will also be lowering the interest amount that you'll be able to deduct from your federal income taxes. This is another cost that some borrowers take into account. We can help you do the math! Call us at 603-893-6616.
Most borrowers find that the monthly savings outweigh the up-front cost of a refinance. We will work with you to find out which loan program is perfect for you, considering your cash on hand, how likely you are to sell your residence in the near future, and how refinancing will effect your taxes. Call us at 603-893-6616 to get you started.
Want to know more about refinancing? Give us a call at 603-893-6616.