Is Refinancing Worth the Cost?
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Have you ever heard the old rule of thumb that says you should only refinance if the new interest rate will be at least two points below your present one? That may have been accurate a while back, but with refinancing dropping in cost recently, it is never the wrong time to explore the options of a new mortgage loan! A refinanced mortgage is often worth its cost several times over, factoring in the benefits that come, along with a reduced interest rate.
When you refinance, you may have the ability to lower your interest rate and monthly payment amount, perhaps considerably. You could also have the ability to "cash out" a portion of the built-up equity in your home, that you can use to consolidate debt, make home improvements, or finance a vacation. You might be able to refinance into a shorter-term mortgage, giving you the ability to build up your equity faster.
All these benefits do cost something, though. With your refinance, you are paying for a lot of the same things you paid for at the time you obtained your existing mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might consider paying points to reduce your interest rate. Your savings over the life of the loan could be substantial if you've paid up front about 3% of the new loan balance. We recommend that you consult a tax professional before acting on rumors that the points paid can be deducted on your federal income taxes.
Speaking of taxes, when your interest rate is lowered, it follows that you'll also be reducing the paid interest amount that you'll be able to deduct on your taxes. This is one more cost that borrowers take into consideration. We can help you do the math! Call us at 708.966.9005.
Ultimately, for most the total of initial costs to refinance are made up soon in monthly savings. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 708.966.9005 to get started.
Curious about refinancing? Give us a call: 708.966.9005.