Is Refinancing Worth the Cost?
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Ever hear the old rule of thumb that states you should only refinance if your new interest rate is at least two points below your current one? That may have been valid years ago, but with the fact that refinancing has been costing less recently, it is never the wrong time to explore the options of a new mortgage! Refinancing has various advantages that often make it worth the initial expenditure many times over.
Advantages of Refinancing
You may be able to lower your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with your refinanced loan. You may also be able to "cash out" a portion of your equity, which you will be able use to consolidate debt, improve your home, or finance a vacation. With reduced interest rates, you might also get the chance to build up home equity more quickly by moving to a shorter-term mortgage loan.
Expenses and Fees
All these advantages do cost something, though. When you refinance, you are paying for a lot of the same things you paid for during your original mortgage loan. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might offer to pay points (prepaid interest) to gain a better interest rate. If you pay (on average) 3% of the mortgage loan amount initially, the savings for the term of the new mortgage loan can be great. You might have heard that these points can be deducted on your income taxes, but since tax regulations are ever-changing, we urge you to speak with a tax professional before considering this in your calculations.
Speaking of taxes, once you lower your interest rate, of course you'll also be reducing the interest amount that you'll be able to deduct on your taxes. This is another expense that borrowers take into consideration. We can help you do the math! Call us at 720-598-8300.
In the end, for most people the total of up-front costs to refinance will be made up soon in savings each month. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your money on hand. Call us at 720-598-8300 to get you started.
Want to know more about refinancing your home? Call us: 720-598-8300.