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. Maybe several years ago that was sage advice, but as refinance costs have been falling recently, it may be time to look into it. A refinanced loan is often worth its cost several times over, factoring in the advantages that it brings, as well as a lower interest rate.
Advantages of Refinancing
You could be able to lower your interest rate (sometimes substantially) and reduce your mortgage payment amount with a refinanced mortgage. You could also have the ability to "cash out" some of the built-up equity in your home, that you can use to consolidate debts, improve your home, or plan a vacation. With reduced rates, you might also be able to build up home equity faster by moving to a shorter-term mortgage.
Of course, you will have some fees and expenses during your the refinance process. With your refinance, you are paying for basically the same things you were charged for at the time you obtained your original mortgage loan. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Do the Math
You might think about paying points to reduce your interest rate. Your savings on the life of the loan might be significant if you've paid up front about three percent of the new loan balance. You might have heard that the points can be deducted on your income taxes, but because tax regulations are difficult to keep up with, we urge you to consult with a tax professional before considering this in your calculations.
One more expense that borrowers may consider is that a reduced rate of interest will reduce the interest amount you'll be able to deduct on your taxes. Call us at (334) 285-8850 to help you do the math.
All things considered, for most people the total of up-front costs to refinance are made up soon in monthly savings. We'll work with you to find out which program is perfect for you, considering your cash on hand, how likely you are to sell your residence in the next few years, and how refinancing could effect your taxes. Call us at (334) 285-8850 to get started.
Want to know more about refinancing? Give us a call: (334) 285-8850.