Is Refinancing Worth the Cost?
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It has been said that only when your new interest is at least two points under your current rate, should you refinance your mortgage. That could have been true years ago, but since refinancing has been costing less recently, it is never the wrong time to think about a new mortgage! Refinancing has a number of benefits that can make it worth the initial cost many times over.
You may be able to bring down your interest rate (sometimes significantly) and have smaller monthly payments with a refinanced mortgage loan. You could also be able to "cash out" a portion of your equity, that you can use to consolidate debts, make home improvements, or take a vacation. With lower rates, you might also get the chance to build your home equity more quickly by switching to a shorter-term loan.
As you probably know, you'll have some fees and expenses during your process of refinancing. With your refinance, you're paying for basically the same things you were charged for during your existing mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying points can help you attain a lower interest rate. If you pay (on average) three percent of the mortgage loan amount up front, the savings for the life of the new mortgage loan can be substantial. You may hear that the points can be tax deductible, but as tax regulations can be difficult to keep up with, we urge you to speak with your tax professional before considering this in your calculations.
An additional cost that borrowers might take into account is that a reduced rate of interest will reduce the interest amount you will deduct on your taxes. Call us at (334) 285-8850 to help you do the math.
Ultimately, for most the total of up-front costs to refinance will be paid back very quickly in savings each month. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at (334) 285-8850 to get you started.
Want to know more about refinancing your home? Call us: (334) 285-8850.