When is Refinancing Worth it?
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It has been said that only in the case your new interest is at least 2 points under your current rate, should you refinance your loan. That might have been true a while back, but with refinancing dropping in cost in recent years, it is a good time to consider a new mortgage! A refinanced loan is often worth its cost many times over, factoring in the advantages that may come, in addition to a lower interest rate.
When you refinance, you might have the ability to lower the interest rate and monthly mortgage payment , perhaps by a lot. Additionally, you may have the option of tapping into your home equity by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. With lower rates, you may also be able to build up home equity faster by moving to a shorter-term loan.
Expenses and Fees
All these benefits do come with some expense, though. You will pay the same sort of expenses and fees as with your current mortgage loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might consider paying points to be given a lower interest rate. When you pay (on average) 3% of the loan amount initially, your savings for the term of the refinanced loan can be great. We recommend that you talk to a tax professional before acting on rumors that any paid points may be deducted on your federal income taxes.
An additional cost that a borrower might consider is that a reduced rate of interest will lower the interest amount you'll be able to deduct on your taxes. Call us at 503-657-3311 to help you do the math.
In the end, for most the total of initial costs to refinance will be made up soon in monthly savings. We'll work with you to find out which mortgage loan program is the best fit for you, looking at your cash on hand, how likely you are to sell your home in the next few years, and what effect refinancing will have on your taxes. Call us at 503-657-3311 to get you started.
Curious about refinancing your home? Give us a call at 503-657-3311.