When is Refinancing Worth it?
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Ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate is at least 2 points under your present rate? Perhaps several years ago that was good advice, but since refinance costs have been falling recently, it could be time to take a serious look. A refinance can be worth its cost many times over, because of the benefits that can come, in addition to a lower interest rate.
Benefits from Refinancing
When you refinance, you might have the ability to reduce the interest rate and monthly mortgage payment , perhaps considerably. You might also have the ability to "cash out" some of the built-up equity in your residence, that you may use to consolidate debts, add on to your home, or take a vacation. With lower rates, you might also get the chance to build up home equity faster by changing to a shorter term mortgage.
All these benefits do come with some expense, though. You will be charged the same kinds of fees as you did with your existing mortgage. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
Paying points can get you a better interest rate. Your savings over the life of the loan may be substantial if you have paid up front about three percent of the new loan balance. You might hear that these points can be deducted on your income taxes, but because tax regulations are ever-changing, please consult with your tax professional before making decisions based on this.
An additional cost that borrowers might take into account is that a reduced rate of interest will lower the interest amount you will be able to deduct on your federal income taxes. Call us at 708.966.9005 to help you do the math.
All things considered, for most the total of up-front costs to refinance will be paid back very quickly in savings each month. We'll work with you to determine which program is the ideal fit for you, looking at your cash on hand, how likely you are to sell your residence in the next few years, and how refinancing might effect your taxes. Call us at 708.966.9005 to get started.
Want to know more about refinancing? Call us: 708.966.9005.