When is Refinancing Worth it?
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Some have said that only if your new interest will be at least 2 points below your current rate, should you refinance your mortgage. That may have been good advice years ago, but with refinancing dropping in cost recently, it's a good time to consider a new mortgage loan! Refinancing has various advantages that will often make it worth the up-front expenditure many times over.
You might be able to lower your interest rate (sometimes significantly) and reduce your monthly payment amount with a refinanced loan. You also could be given the option of pulling out some of the equity in your home by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. With lower rates, you might also be able to build up home equity more quickly by moving to a shorter-term loan.
Fees and Expenses
All these benefits do come with some expense, though. When you refinance, you're paying for most of the same things you were charged for when you obtained your original mortgage. These may include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Do the Math
Paying points can get you a lower interest rate. When you pay (on average) 3% of the mortgage loan amount up front, your savings for the life of the new mortgage loan can be substantial. We recommend that you consult with a tax professional before acting on hear-say that the paid points can be deducted on your federal income taxes.
Speaking of taxes, when you bring down your interest rate, it follows that you'll also be reducing the interest amount that you may deduct from your federal income taxes. This is one more cost that borrowers take into account. We can help you do the math! Call us at 720-598-8300.
Most people find that the monthly savings balance out the up-front cost of refinancing. We will work with you to determine what program is ideal for you, considering your cash on hand, the likelihood of selling your home in the next few years, and how refinancing will effect your taxes. Call us at 720-598-8300 to get started.
Curious about refinancing your home? Give us a call at 720-598-8300.