Is Refinancing Worth the Cost?
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Have you ever heard the old rule of thumb that states you should only refinance if your new interest rate will be at least two points lower than your present one? That may have been valid years ago, but with the fact that refinancing has been costing less recently, it is never the wrong time to consider a new loan! Refinancing has a number of advantages that often make it worth the up-front expenditure a few times over.
Benefits
You might be able to bring down your interest rate (sometimes by a lot) and have smaller monthly payments with your refinanced loan. You might also have the ability to "cash out" a portion of your equity, which you are able use to take care of higher interest debts, make home improvements, or finance a vacation. With reduced interest rates, you might also be able to build up home equity more quickly by moving to a shorter-term mortgage.
The Cost
Of course, you will have to pay for your process of refinancing. You will pay the same sort of expenses and fees as you did with your current mortgage loan. These might include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
Paying discount points can help you attain a lower interest rate. Your savings on the life of the loan may be significant if you've paid up front about 3% of the new loan balance. We recommend that you consult a tax professional before acting on advice that any points paid may be deducted on your taxes.
Another thing about taxes is that when your interest rate is reduced, of course you will also be lowering the paid interest amount that you can deduct from your federal income taxes. This is another expense that borrowers take into account. We can help you do the math! Call us at 972-334-0566.
Most borrowers find that the savings each month quickly balance out the initial expenses of a refinance. We can help you explore what your options are, considering the effect a refinance might have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at 972-334-0566 to get you started.
Want to know more about refinancing? Give us a call: 972-334-0566.