When is Refinancing Worth it?
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Ever hear the pearl of wisdom that states you should only refinance if your new interest rate will be at least 2 points under your existing rate? Maybe several years ago that was sage advice, but as refinance costs have been falling recently, it may be time to look into it. Refinancing your loan has a number of advantages that will often make it worth the initial cost several times over.
You might be able to lower your interest rate (sometimes significantly) and reduce your mortgage payment amount with a refinanced mortgage. Additionally, you may be given the option of tapping into your home equity by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. You may have the option to refinance into a shorter-term mortgage program, giving you the ability to add to your equity quicker.
Of course, you'll have some fees and expenses during the process of refinancing. When you refinance, you are paying for a lot of the same things you were charged for during your original mortgage loan. These might include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Do the Math
You might consider paying points to be given a better interest rate. Your savings on the life of the loan may be significant if you have paid up front about three percent of the new loan total. You might be told that the points may be tax deductible, but because tax regulations are difficult to keep up with, please speak with your tax professional before making any decisions based on this.
An additional expense that borrowers may take into account is that a lower interest rate will lower the interest amount you will be able to deduct on your federal income taxes. Call us at (972) 292-0448 to help you do the math.
In the end, for most the amount of up-front costs to refinance will be paid back very quickly in monthly savings. We can help you figure out your options, considering the effect a refinance may have on your taxes, how likely you might be to sell in the next couple of years, and your money on hand. Call us at (972) 292-0448 to get started.
Curious about refinancing? Call us: (972) 292-0448.