When is Refinancing Worth it?
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It has been said that only if your new interest is at least two points lower, should you refinance your mortgage. That may have been valid years ago, but since refinancing has been costing less recently, it's a good time to consider a new mortgage! Refinancing your mortgage has some benefits that will often make it worth the up-front expenditure a few times over.
You might be able to lower your interest rate (sometimes significantly) and make smaller monthly payments with a refinanced mortgage. You could also have the option to "cash out" a portion of your home equity, that you can use to take care of higher interest debt, add on to your home, or take a vacation. With lower interest rates, you might also get the chance to build your home equity faster by changing to a shorter-term mortgage.
As you probably know, you'll have some fees and expenses during your the refinance process. You will pay the same types of fees as you did with your existing mortgage loan. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
Paying discount points can result in a better interest rate. Your savings over the life of the loan may be significant if you've paid up front about 3% of the new loan total. We recommend that you talk to a tax professional before acting on hear-say that the points paid may be deducted on your taxes.
Another thing about taxes is that if your interest rate is lowered, of course you'll also be reducing the interest amount that you may deduct from your federal income taxes. This is one more expense that some borrowers consider. We can help you do the math! Call us at 503-657-3311.
Most people find that the savings per month balance out the initial cost of a refinance. We'll help you find out which mortgage program is right for you, considering your cash on hand, the likelihood of selling your home in the next few years, and the effect refinancing will have on your taxes. Call us at 503-657-3311 to get you started.
Curious about refinancing your home? Call us at 503-657-3311.