When is Refinancing Worth it?
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Ever heard the pearl of wisdom that says you should only refinance if the new interest rate is at least 2 points lower than your existing rate? That might have been true a while back, but with refinancing dropping in cost recently, it is never the wrong time to think about a new mortgage! A refinance may be worth its cost several times over, because of the benefits that it brings, as well as a reduced interest rate.
Advantages of Refinancing
You may be able to lower your interest rate (sometimes substantially) and make smaller mortgage payments with a refinanced mortgage loan. You also could be given the option of tapping into the equity in your home by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also be able to build up home equity more quickly by switching to a shorter-term mortgage loan.
The Cost
As you probably expect, you will have some fees and expenses during your the refinance process. When you refinance, you are paying for a lot of the same things you were charged for at the time you obtained your current mortgage loan. Among these can be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Do the Math
You might need to pay discount points (prepaid interest) to gain a lower rate of interest. If you pay (on average) three percent of the mortgage loan amount initially, the savings for the term of the refinanced mortgage can be substantial. Please consult a tax professional before acting on hear-say that any points paid can be deducted on your taxes.
An additional expense that a borrower might consider is that a lower interest rate will lower the interest amount you'll deduct on your taxes. Call us at (214) 317-4272 to help you do the math.
In the end, for most people the total of initial costs to refinance are made up soon in savings each month. We can help you find out your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at (214) 317-4272 to get you started.
Want to know more about refinancing? Call us: (214) 317-4272.