When is Refinancing Worth it?
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It has been said that only if your new interest is at least two points lower, should you refinance your loan. That might have been good advice a while back, but with the fact that refinancing has been costing less recently, it's a good time to consider a new loan! Refinancing has various benefits that can make it worth the up-front cost a few times over.
Advantages of Refinancing
When you refinance, you may be able to lower the interest rate and monthly mortgage payment , perhaps significantly. Additionally, you could be given the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also get the chance to build your home equity faster by moving to a shorter term loan.
Fees and Expenses
All these advantages do cost something, though. You'll pay the same sort of expenses and fees as with your existing mortgage. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
Paying points can help you attain a lower interest rate. Your savings over the life of the mortgage loan could be significant if you've paid up front about 3% of the new loan balance. You may hear that the points can be deducted on your income taxes, but because tax regulations are difficult to keep up with, please consult with a tax professional before depending on this.
One more cost that a borrower might consider is that a lower interest rate will lower the interest amount you will be able to deduct from your taxes. Call us at 703-288-0777 to help you do the math.
In the end, for most borrowers the amount of initial costs to refinance are made up soon in monthly savings. We can help you explore what your options are, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at 703-288-0777 to get you started.
Want to know more about refinancing? Give us a call at 703-288-0777.
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