Is Refinancing Worth the Cost?
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Have you ever heard the pearl of wisdom that states you should only consider refinancing if your new interest rate will be at least two points lower than your present one? That could have been valid a while back, but as refinancing has been costing less over the last few years, it's never the wrong time to consider a new mortgage loan! A refinance can be worth its cost several times over, considering the benefits that may come, in addition to a reduced interest rate.
When you refinance, you might have the ability to lower the interest rate and monthly payment amount, sometimes significantly. You could also have the ability to "cash out" a portion of your home equity, that you can use to consolidate debt, make home improvements, or finance a vacation. With lower rates, you might also be able to build up home equity faster by moving to a shorter-term mortgage loan.
Expenses and Fees
Of course, you will have to pay for your process of refinancing. With your refinance, you're paying for most of the same things you were charged for when you got your current mortgage loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Do the Math
You might think about paying points to reduce your interest rate. Your savings on the life of the mortgage could be significant if you've paid up front about three percent of the new loan balance. You may have heard that these points can be deducted on your income taxes, but because tax regulations are ever-changing, please speak with a tax professional before depending on this.
Another thing about taxes is that once you reduce your interest rate, it follows that you will also be lowering the paid interest amount that you may deduct from your taxes. This is one more expense that some borrowers take into account. Call us at 407-834-3377 to help you do the math.
Most borrowers find that the savings each month quickly outweigh the up-front expenses of a refinance. We can help you find out what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at 407-834-3377 to get started.
Curious about refinancing your home? Give us a call at 407-834-3377.