When is Refinancing Worth it?
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Have you ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate will be at least 2 points lower than your present one? Perhaps that was good advice several years ago, but since refinance costs have been getting lower, it could be time to take a serious look. Refinancing your mortgage has various advantages that will often make it worth the initial expenditure a few times over.
You may be able to lower your interest rate (sometimes by a lot) and reduce your mortgage payment amount with a refinanced mortgage. You might also have the ability to "cash out" a portion of the built-up equity in your residence, which you are able use to take care of higher interest debts, make home improvements, or take a vacation. With reduced rates, you might also get the chance to build your home equity more quickly by moving to a shorter term mortgage loan.
All of these advantages do cost something, though. When you refinance, you are paying for many of the same things you paid for during your original mortgage. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying points can result in a lower interest rate. The money you'll save on the life of the mortgage could be significant if you have paid up front about 3% of the new loan balance. Please talk to a tax professional before acting on advice that these paid points may be deducted on your taxes.
Speaking of taxes, if your interest rate is lowered, of course you will also be lowering the interest amount that you'll be able to deduct from your federal income taxes. This is another cost that some borrowers consider. We can help you do the math! Call us at 503-657-3311.
In the end, for most borrowers the total of initial costs to refinance are paid back very quickly in savings each month. We can help you find out what your options are, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at 503-657-3311 to get you started.
Want to know more about refinancing your home? Give us a call: 503-657-3311.