When is Refinancing Worth it?
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Some have said that only in the case your new interest is at least 2 points below your current rate, should you refinance your mortgage. That could have been true a while back, but with the fact that refinancing has been costing less recently, it is never the wrong time to consider a new mortgage! Refinancing has some advantages that often make it worth the up-front cost a few times over.
When you refinance, you could have the ability to reduce the interest rate and mortgage payment , sometimes significantly. Additionally, you might be given the option of pulling out some of your home equity by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also be able to build up home equity faster by changing to a shorter-term mortgage.
Expenses and Fees
All of these advantages do come with some expense, though. You will have the same types of fees as with your present home loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might look into paying points to get a reduced interest rate. The money you'll save over the life of the mortgage loan might be substantial if you have paid up front about 3% of the new loan balance. You may hear that these points may be tax deductible, but because tax regulations are difficult to keep up with, we urge you to consult your tax professional before considering this in your calculations.
An additional cost that a borrower may take into account is that a lower interest rate will reduce the interest amount you will deduct on your federal income taxes. We can help you do the math! Call us at (334) 285-8850.
In the end, for most the total of up-front costs to refinance will be made up soon in monthly savings. We can help you find out what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your money on hand. Call us at (334) 285-8850 to get started.
Curious about refinancing your home? Call us: (334) 285-8850.