When is Refinancing Worth it?
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Ever hear the old rule of thumb that says you should only consider refinancing if the new interest rate is at least two points under your existing rate? That could have been valid a while back, but since refinancing has been costing less over the last few years, it's a good time to think about a new loan! A refinance is often worth its cost several times over, because of the advantages that may come, as well as a lower interest rate.
Advantages of Refinancing
You could be able to bring down your interest rate (sometimes significantly) and reduce your mortgage payment amount with a refinanced loan. You might also have the option to "cash out" a portion of the built-up equity in your residence, which you are able use to consolidate debt, add on to your home, or plan a vacation. With lower interest rates, you might also be able to build up home equity more quickly by switching to a shorter-term loan.
Fees and Expenses
Of course, you'll have to pay for the process of refinancing. When you refinance, you are paying for basically the same things you paid for when you obtained your current mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might consider paying points to reduce your interest rate. Your savings over the life of the loan might be significant if you have paid up front about three percent of the new loan total. You might be told that these points may be deducted on your income taxes, but since tax regulations can be difficult to keep up with, we urge you to consult a tax professional before depending on this.
Speaking of taxes, once your interest rate is reduced, naturally you will also be lowering the interest amount that you will be able to deduct from your taxes. This is one more cost that some borrowers take into account. Call us at 720-598-8300 to help you do the math.
Most borrowers find that the monthly savings outweigh the initial expenses of refinancing. We'll work with you to figure out what program is ideal for you, looking at your cash on hand, the likelihood of selling your residence in the near future, and what effect refinancing may have on your taxes. Call us at 720-598-8300 to get started.
Want to know more about refinancing your home? Give us a call at 720-598-8300.