When is Refinancing Worth it?
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It has been said that only in the case your new interest will be at least two points lower, should you refinance your mortgage. Perhaps that was sound advice several years ago, but since refinance costs have been getting lower, it could be time to take a serious look. A refinanced mortgage loan may be worth its cost several times over, factoring in the advantages that it brings, along with a reduced interest rate.
Benefits from Refinancing
You may be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with your refinanced loan. 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. You may have the option to refinance to a shorter-term mortgage program, enabling you to build your equity quicker.
Expenses and Fees
All of these benefits do cost something, though. With your refinance, you're paying for basically the same things you were charged for at the time you got your original mortgage. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You could need to pay points (prepaid interest) to gain a more favorable rate of interest. Your savings on the life of the loan could be significant if you've paid up front about three percent of the new loan balance. We recommend that you talk to a tax professional before acting on rumors that these paid points can be deducted on your federal income taxes.
Speaking of taxes, when your interest rate is reduced, it follows that you'll also be lowering the paid interest amount that you will be able to deduct from your federal income taxes. This is one more cost that some borrowers take into consideration. Call us at (214) 945-1066 to help you do the math.
In the end, for most the total of initial costs to refinance are paid back soon in savings each month. We will help you find out which mortgage loan program is the ideal fit for you, considering your cash on hand, how likely you are to sell your house in the near future, and the effect refinancing could have on your taxes. Call us at (214) 945-1066 to get you started.
Want to know more about refinancing your home? Call us at (214) 945-1066.