When is Refinancing Worth it?
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It has been said that only when your new interest is at least two points below your current rate, should you refinance your mortgage. That could have been valid a while back, but with refinancing dropping in cost recently, it's never the wrong time to explore the options of a new mortgage! Refinancing your mortgage has a variety of benefits that will often make it worth the initial expenditure many times over.
You could be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with your refinanced mortgage. You might also be able to "cash out" some of your home equity, which you can use to take care of higher interest debts, make home improvements, or take a vacation. You may have the option to refinance to a shorter-term mortgage, giving you the ability to build up your equity quicker.
Expenses and Fees
As you probably know, you will have to pay for the process of refinancing. When you refinance, you are paying for a lot of the same things you were charged for at the time you obtained your original mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Doing the Math
You could need to pay points (prepaid interest) to attain a more favorable rate of interest. If you pay (on average) 3% of the loan amount initially, your savings for the term of the new mortgage can be substantial. We recommend that you consult with a tax professional before acting on hear-say that these paid points may be deducted on your taxes.
Another thing about taxes is that once your interest rate is lowered, it follows that you'll also be reducing the interest amount that you will be able to deduct from your federal income taxes. This is another cost that some borrowers take into consideration. We can help you do the math! Call us at (866) 298-0700.
Most borrowers find that the monthly savings balance out the initial cost of a refinance. We can help you explore 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 (866) 298-0700 to get started.
Curious about refinancing your home? Call us at (866) 298-0700.