When is Refinancing Worth it?

It has been said that only when your new interest will be at least 2 points below your current rate, should you refinance your mortgage. That could have been valid a while back, but since refinancing has been costing less recently, it's never the wrong time to explore the options of a new mortgage! A refinanced loan is often worth its cost many times over, factoring in the advantages that can come, in addition to a lower interest rate.

Benefits

When you refinance, you may have the ability to lower your interest rate and monthly payment amount, sometimes by a lot. You also may have the option of tapping into the equity in your home by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. With reduced rates, you might also get the chance to build your home equity more quickly by switching to a shorter term loan.

Fees and Expenses

All these benefits do cost something, though. When you refinance, you're paying for basically the same things you were charged for during your existing mortgage. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

When you refinance your present mortgage loan too soon, there might be a penalty . This depends on the terms of your existing loan. However, these penalties may apply only to the first several years of your mortgage. We will help you sort through the details: contact us at 5208867283.

Doing the Math

You might consider paying points to reduce your interest rate. If you pay (on average) 3% of the loan amount at the start, the savings for the term of the refinanced mortgage loan can be substantial. Please talk to a tax professional before acting on advice that any points paid can be deducted on your taxes.

One more cost that a borrower may take into account is that a lower interest rate will lower the interest amount you'll deduct from your taxes. Call us at 5208867283 to help you do the math.

Most people find that the monthly savings quickly balance out the initial expenses of a refinance. We can help you figure out your options, considering the effect a refinance could have on your taxes, how likely you might be to sell in the next couple of years, and your cash on hand. Call us at 5208867283 to get you started.