When is Refinancing Worth it?
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Some have said that only when your new interest will be at least 2 points under your current rate, should you refinance your mortgage. Maybe that was sound advice a number of years ago, but as refinance costs have been falling recently, it could be time to take a serious look. Refinancing has a variety of advantages that will often make it worth the initial cost many times over.
You might be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with your refinanced loan. You may also be able to "cash out" a portion of your home equity, which you may use to take care of higher interest debt, improve your home, or finance a vacation. With reduced interest rates, you may also be able to build your home equity faster by changing to a shorter term loan.
Expenses and Fees
All of these advantages do cost something, though. You'll have to pay the same kinds of expenses and fees as you did with your existing mortgage loan. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Do the Math
You could offer to pay discount points (prepaid interest) to gain a better interest rate. Your savings on the life of the mortgage loan could be significant if you have paid up front about three percent of the new loan balance. You might be told that these points can be tax deductible, but since tax regulations can be ever-changing, please consult a tax professional before considering this in your calculations.
Another cost that borrowers may consider is that a reduced rate of interest will reduce the interest amount you'll deduct from your federal income taxes. We can help you do the math! Call us at 720-598-8300.
Most borrowers find that the monthly savings quickly outweigh the initial expenses of refinancing. We will help you find out which mortgage program is the ideal fit for you, considering your cash on hand, the likelihood of selling your residence in the near future, and how refinancing will effect your taxes. Call us at 720-598-8300 to get you started.
Curious about refinancing your home? Call us at 720-598-8300.