Is Refinancing Worth the Cost?
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It has been said that only in the case your new interest is at least two points lower, should you refinance your loan. That may have been accurate a while back, but since refinancing has been costing less recently, it's a good time to explore the options of a new mortgage loan! Refinancing has various benefits that will often make it worth the initial cost several times over.
Advantages of Refinancing
When you refinance, you could be able to reduce your interest rate and mortgage payment amount, sometimes significantly. You may also be able to "cash out" a portion of the built-up equity in your home, that you may use to consolidate debt, make home improvements, or plan a vacation. With lower interest rates, you may also get the chance to build your home equity faster by moving to a shorter-term loan.
Expenses and Fees
Of course, you will have to pay for the the refinance process. You'll have to pay the same sort of expenses and fees as you did with your current mortgage. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might offer to pay discount points (prepaid interest) to gain a lower rate of interest. The money you'll save on the life of the mortgage loan could be substantial if you have paid up front about 3% of the new loan balance. Please talk to a tax professional before acting on hear-say that these paid points can be deducted on your taxes.
Another cost that borrowers might take into account is that a reduced interest rate will lower the interest amount you'll be able to deduct from your taxes. Call us at 305-800-3863 to help you do the math.
Ultimately, for most borrowers the total of up-front costs to refinance will be made up very quickly in savings each month. We can help you figure out your options, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the near future, and your cash on hand. Call us at 305-800-3863 to get started.
Curious about refinancing? Call us at 305-800-3863.