When is Refinancing Worth it?
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It has been said that only when your new interest will be at least 2 points lower, should you refinance your loan. That may have been accurate years ago, but with refinancing dropping in cost recently, it is a good time to explore the options of a new loan! A refinance is often worth its cost several times over, considering the benefits that it brings, along with a reduced interest rate.
Advantages of Refinancing
When you refinance, you may be able to lower your interest rate and monthly mortgage payment amount, sometimes considerably. You also may be given the option of tapping into your home equity by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also get the chance to build up home equity more quickly by changing to a shorter term mortgage.
Expenses and Fees
All of these advantages do cost something, though. With your refinance, you're paying for many of the same things you paid for during your current mortgage loan. These may include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
Paying points can get you a lower interest rate. If you pay (on average) three percent of the loan amount at the start, your savings for the life of the refinanced mortgage can be great. You might hear that these points may be tax deductible, but because tax regulations can be difficult to keep up with, please consult with a tax professional before considering this in your calculations.
Another thing about taxes is that once your interest rate is reduced, of course you'll also be lowering the paid interest amount that you may deduct from your taxes. This is one more cost that some borrowers take into consideration. Call us at 425-508-9988 to help you do the math.
In the end, for most people the amount of up-front costs to refinance are made up very quickly in monthly savings. We will help you determine which loan program is perfect for you, taking into account your cash on hand, how likely you are to sell your home in the near future, and how refinancing could effect your taxes. Call us at 425-508-9988 to get you started.
Curious about refinancing your home? Give us a call: 425-508-9988.