Is Refinancing Worth the Cost?
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Ever hear the pearl of wisdom that says you should only refinance if your new interest rate will be at least two points below your existing rate? Perhaps that was sound advice several years ago, but as refinance costs have been getting lower, it could be a good time to take a serious look. Refinancing your loan has some advantages that often make it worth the up-front cost many times over.
You might be able to bring down your interest rate (sometimes significantly) and have smaller mortgage payments with a refinanced mortgage. You could also have the ability to "cash out" some of your equity, which you may use to take care of higher interest debt, make home improvements, or take a vacation. With reduced rates, you might also be able to build up home equity faster by changing to a shorter-term loan.
Fees and Expenses
As you probably expect, you will have to pay for your the refinance process. You'll be charged the same sort of expenses and fees as with your present mortgage. These may include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Do the Math
You could need to pay points (prepaid interest) to attain a lower rate of interest. The money you'll save over the life of the loan might be substantial if you have paid up front about three percent of the new loan total. You may hear that points may be deducted on your income taxes, but since tax regulations can be difficult to keep up with, we urge you to consult with your tax professional before considering this in your calculations.
One more cost that a borrower might consider is that a reduced interest rate will reduce the interest amount you will deduct on your taxes. Call us at (478) 746-2063 to help you do the math.
Most borrowers find that the monthly savings quickly balance out the initial expenses of a refinance. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at (478) 746-2063 to get you started.
Want to know more about refinancing your home? Give us a call: (478) 746-2063.