Is Refinancing Worth the Cost?
Some have said that only if your new interest is at least 2 points lower, should you refinance your loan. Maybe several years ago that was good advice, but as refinance costs have been falling recently, it could be a good time to look into it. A refinance is often worth its cost several times over, considering the advantages that it brings, as well as a reduced interest rate.
When you refinance, you might be able to lower your interest rate and monthly payment amount, perhaps significantly. You may also have the ability to “cash out” a portion of your home equity, which you are able use to take care of higher interest debt, add on to your home, or take a vacation. You may have the option to refinance into a shorter-term mortgage program, giving you the ability to build your equity faster.
All of these advantages do come with some expense, though. You’ll have the same types of expenses and fees as you did with your present mortgage. Among these can be settlement costs, appraisal fees, lender’s title insurance, underwriting fees, and so on.
Do the Math
You might investigate paying points to reduce your interest rate. The amount you’ll save over the life of the mortgage loan might be significant if you have paid up front about three percent of the new loan balance. You may be told that the points can be tax deductible, but since tax regulations can be difficult to keep up with, please consult with a tax professional before depending on this.
Speaking of taxes, once your interest rate is reduced, naturally you will also be lowering the paid interest amount that you may deduct from your taxes. This is another expense that borrowers take into account. Call us at 6362824900 to help you do the math.
Ultimately, for most the amount of up-front costs to refinance will be made up soon in monthly savings. We will work with you to determine what mortgage program is perfect for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and how refinancing can effect your taxes.
Curious about refinancing? Give us a call at 636 282 4900.