When is Refinancing Worth it?

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Have you ever heard the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least two points under your present one? Perhaps several years ago that was good advice, but as refinance costs have been getting lower, it could be a good time to look into it. A refinanced mortgage is often worth its cost many times over, factoring in the advantages that it brings, as well as a reduced interest rate.

Advantages

You could be able to lower your interest rate (sometimes by a lot) and have smaller monthly payments with your refinanced mortgage. You could also have the ability to "cash out" a portion of your home equity, which you can use to take care of higher interest debt, improve your home, or plan a vacation. You might have the option to refinance into a shorter-term mortgage program, giving you the ability to build your home equity faster.

The Cost

All these benefits do come with some expense, though. You'll have to pay the same kinds of fees as with your present mortgage loan. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

Paying points can help you get a lower interest rate. Your savings over the life of the mortgage might be significant if you have paid up front about three percent of the new loan total. Please consult a tax professional before acting on advice that the points paid may be deducted on your federal income taxes.

Another thing about taxes is that if your interest rate is reduced, of course you'll also be reducing the paid interest amount that you may deduct on your taxes. This is another expense that some borrowers consider. We can help you do the math! Call us at (334) 285-8850.

Ultimately, for most the amount of initial costs to refinance will be paid back soon in savings each month. We will work with you to find out what loan program is best for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and how refinancing can effect your taxes. Call us at (334) 285-8850 to get you started.

Want to know more about refinancing? Give us a call at (334) 285-8850.

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