When is Refinancing Worth it?

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Have you ever heard the old rule of thumb that states you should only refinance if the new interest rate will be at least two points below your current one? That could have been accurate a while back, but with refinancing dropping in cost recently, it is never the wrong time to consider a new mortgage! A refinance can be worth its cost many times over, factoring in the advantages that can come, along with a lower interest rate.

Benefits from Refinancing

When you refinance, you may be able to reduce your interest rate and monthly payment , sometimes considerably. You might also have the option to "cash out" a portion of your home equity, which you will be able use to consolidate debts, add on to your home, or plan a vacation. You could be able to refinance into a shorter-term mortgage program, enabling you to build up your home equity quicker.

Fees and Expenses

As you probably know, you'll have some fees and expenses during the the refinance process. You'll have the same sort of expenses and fees as you did with your current mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Do the Math

You might need to pay points (prepaid interest) to get a more favorable interest rate. If you pay (on average) 3% of the loan amount up front, the savings for the life of the refinanced loan can be substantial. You may have heard that points can be deducted on your income taxes, but since tax regulations can be ever-changing, please consult with your tax professional before considering this in your calculations.

Speaking of taxes, when you reduce your interest rate, of course you'll also be reducing the interest amount that you will be able to deduct on your taxes. This is another expense that some borrowers consider. We can help you do the math! Call us at 503-657-3311.

In the end, for most people the total of up-front costs to refinance are paid back soon in savings each month. We will help you find out what mortgage loan program is perfect for you, taking into account your cash on hand, the likelihood of selling your residence in the near future, and the effect refinancing will have on your taxes. Call us at 503-657-3311 to get you started.

Want to know more about refinancing? Give us a call at 503-657-3311.