Is Refinancing Worth the Cost?
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Some have said that only in the case your new interest is at least two points lower, should you refinance your loan. Perhaps that was sound advice a number of years ago, but as refinance costs have been falling recently, it could be a good time to look into it. A refinanced loan is often worth its cost several times over, considering the benefits that come, along with a reduced interest rate.
Benefits from Refinancing
When you refinance, you might have the ability to lower the interest rate and mortgage payment amount, perhaps by a lot. You may also have the ability to "cash out" some of your home equity, which you can use to take care of higher interest debt, improve your home, or take a vacation. With lower rates, you may also be able to build up home equity faster by moving to a shorter-term mortgage loan.
Expenses and Fees
All these benefits do cost something, though. You will have to pay the same kinds of fees as you did with your present mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
Paying points can get you a lower interest rate. If you pay (on average) three percent of the mortgage loan amount up front, your savings for the term of the new loan can be significant. We recommend that you consult with a tax professional before acting on advice that the paid points can be deducted on your taxes.
An additional expense that a borrower may consider is that a lower rate of interest will lower the interest amount you will deduct on your taxes. Call us at (334) 285-8850 to help you do the math.
All things considered, for most people the amount of up-front costs to refinance will be paid back very quickly in savings each month. We can help you explore what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your cash on hand. Call us at (334) 285-8850 to get started.
Curious about refinancing? Give us a call: (334) 285-8850.