When is Refinancing Worth it?
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It has been said that only if your new interest will be at least two points lower, should you refinance your loan. Perhaps that was sound advice a number of years ago, but as refinance costs have been falling recently, it could be a good time to look into it. Refinancing has various advantages that can make it worth the initial cost a few times over.
When you refinance, you might have the ability to reduce the interest rate and monthly payment , sometimes significantly. Additionally, you might be given the option of tapping into the equity in your home by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. You could have the option to refinance into a shorter-term mortgage program, enabling you to build your home equity quicker.
Expenses and Fees
All these benefits do come with some expense, though. With your refinance, you are paying for many of the same things you were charged for at the time you got your existing mortgage loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might offer to pay points (prepaid interest) to gain a lower interest rate. The money you'll save over the life of the mortgage loan could be significant if you have paid up front about 3% of the new loan balance. You may hear that points may be tax deductible, but because tax regulations can be difficult to keep up with, we urge you to consult with your tax professional before depending on this.
Speaking of taxes, if your interest rate is lowered, it follows that you'll also be reducing the paid interest amount that you'll be able to deduct from your federal income taxes. This is one more expense that some borrowers take into account. We can help you do the math! Call us at 503-657-3311.
Most borrowers find that the savings per month balance out the initial expenses of refinancing. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at 503-657-3311 to get started.
Want to know more about refinancing your home? Call us at 503-657-3311.