When is Refinancing Worth it?
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It has been said that only if your new interest will be at least 2 points lower, should you refinance your mortgage. That could have been sound advice a while back, but with refinancing dropping in cost recently, it is a good time to explore the options of a new mortgage! Refinancing has various benefits that often make it worth the initial expenditure many times over.
Advantages
When you refinance, you may be able to reduce your interest rate and monthly payment amount, sometimes significantly. You also could have the option of tapping into your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or take your family on a vacation. With reduced rates, you might also be able to build up home equity more quickly by moving to a shorter term loan.
Expenses and Fees
All of these advantages do come with some expense, though. With your refinance, you are paying for basically the same things you paid for at the time you obtained your original mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying points can get you a lower interest rate. Your savings on the life of the loan may be significant if you've paid up front about 3% of the new loan total. Please consult with a tax professional before acting on rumors that any points paid can be deducted on your federal income taxes.
Another cost that borrowers may consider is that a reduced rate of interest will lower the interest amount you will be able to deduct from your federal income taxes. Call us at 720-598-8300 to help you do the math.
Ultimately, for most the total of up-front costs to refinance will be paid back very quickly in savings each month. We will help you figure out what loan program is best for you, considering your cash on hand, how likely you are to sell your house in the near future, and the effect refinancing may have on your taxes. Call us at 720-598-8300 to get started.
Want to know more about refinancing? Give us a call: 720-598-8300.