When is Refinancing Worth it?
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Some have said that only if your new interest will be at least two points lower, should you refinance your loan. Perhaps several years ago that was good advice, but since refinance costs have been getting lower, it may be a good time to take a serious look. A refinance may be worth its cost several times over, because of the benefits that come, as well as a reduced interest rate.
You may be able to bring down your interest rate (sometimes substantially) and make smaller mortgage payments with your refinanced mortgage. Additionally, you might have the option of pulling out some of the equity in your house by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. You could be able to refinance to a shorter-term mortgage program, enabling you to build up your home equity quicker.
As you probably expect, you'll have some fees and expenses during your process of refinancing. When you refinance, you are paying for a lot of the same things you paid for at the time you got your existing mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might need to pay discount points (prepaid interest) to gain a more favorable rate of interest. When you pay (on average) 3% of the loan amount initially, your savings for the term of the new mortgage loan can be great. Please consult a tax professional before acting on hear-say that the paid points may be deducted on your taxes.
Another expense that borrowers may take into account is that a reduced interest rate will reduce the interest amount you'll deduct from your taxes. Call us at 503-657-3311 to help you do the math.
In the end, for most the amount of initial costs to refinance are made up very quickly in savings each month. We will work with you to determine which mortgage loan program is best for you, looking at your cash on hand, how likely you are to sell your house in the next few years, and how refinancing may effect your taxes. Call us at 503-657-3311 to get you started.
Want to know more about refinancing your home? Give us a call at 503-657-3311.