Is Refinancing Worth the Cost?
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Ever hear the old rule of thumb that says you should only consider refinancing if your new interest rate is at least two points below your current one? Perhaps that was sound advice several years ago, but as refinance costs have been falling recently, it may be time to take a serious look. A refinanced loan may be worth its cost many times over, considering the benefits that may come, along with a lower interest rate.
Benefits
You could be able to lower your interest rate (sometimes significantly) and have smaller monthly payments with your refinanced mortgage loan. You might also have the ability to "cash out" some of your equity, that you will be able use to consolidate debts, make home improvements, or plan a vacation. With lower interest rates, you may also get the chance to build your home equity faster by switching to a shorter-term mortgage loan.
The Cost
Of course, you will have to pay for the the refinance process. You will have to pay the same sort of expenses and fees as with your present home loan. These could include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Do the Math
You could offer to pay discount points (prepaid interest) to gain a lower interest rate. The money you'll save over the life of the mortgage loan could be substantial if you've paid up front about three percent of the new loan balance. You might hear that these points may be tax deductible, but as tax regulations can be difficult to keep up with, we urge you to speak with a tax professional before considering this in your calculations.
Speaking of taxes, when you lower your interest rate, of course you will also be reducing the interest amount that you'll be able to 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 720-598-8300.
All things considered, for most people the total of initial costs to refinance will be paid back very quickly in savings each month. We will work with you to determine which program is perfect for you, looking at your cash on hand, the likelihood of selling your home in the near future, and how refinancing can effect your taxes. Call us at 720-598-8300 to get you started.
Want to know more about refinancing your home? Call us: 720-598-8300.