When is Refinancing Worth it?

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It has been said that only when your new interest will be at least 2 points lower, should you refinance your mortgage. Perhaps several years ago that was sage advice, but since refinance costs have been falling recently, it could be a good time to look into it. Refinancing has various advantages that often make it worth the initial expenditure a few times over.

Advantages

You may be able to lower your interest rate (sometimes substantially) and make smaller mortgage payments with a refinanced mortgage loan. You could also be able to "cash out" a portion of the built-up equity in your home, which you may use to consolidate debt, add on to your home, or finance a vacation. With reduced interest rates, you might also get the chance to build up home equity faster by switching to a shorter-term mortgage loan.

Expenses and Fees

As you probably expect, you will have to pay for your process of refinancing. You will be charged the same sort of fees as you did with your existing home loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Doing the Math

You might consider paying points to reduce your interest rate. If you pay (on average) 3% of the mortgage loan amount up front, your savings for the term of the new mortgage loan can be significant. Please consult a tax professional before acting on hear-say that these points paid may be deducted on your federal income taxes.

Another thing about taxes is that once your interest rate is reduced, naturally you'll also be lowering the paid interest amount that you will be able to deduct on your taxes. This is one more expense that some borrowers take into account. Call us at (972) 292-0448 to help you do the math.

Most borrowers find that the savings each month outweigh the initial cost of a refinance. We can help you explore what your options are, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at (972) 292-0448 to get you started.

Want to know more about refinancing? Give us a call: (972) 292-0448.

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