When is Refinancing Worth it?
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Ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least 2 points lower than your existing rate? Perhaps several years ago that was wise advice, but since refinance costs have been falling recently, it may be a good time to take a serious look. Refinancing has various benefits that can make it worth the initial expenditure a few times over.
Advantages of Refinancing
You may be able to lower your interest rate (sometimes significantly) and make smaller mortgage payments with a refinanced mortgage. You may also be able to "cash out" some of the built-up equity in your home, that you may use to take care of higher interest debt, improve your home, or finance a vacation. You may have the option to refinance to a shorter-term mortgage loan, giving you the ability to build your home equity faster.
Fees and Expenses
All these benefits do come with some expense, though. You'll have to pay the same types of expenses and fees as you did with your current home loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying points can help you get a better interest rate. When you pay (on average) three percent of the loan amount initially, the savings for the term of the new loan can be great. Please talk to a tax professional before acting on rumors that these paid points can be deducted on your taxes.
Speaking of taxes, if your interest rate is reduced, of course you will also be lowering the paid interest amount that you'll be able to deduct from your taxes. This is another cost that some borrowers take into account. We can help you do the math! Call us at (512) 422-9036.
Most people find that the monthly savings quickly outweigh the initial expenses of refinancing. We can help you figure out your options, 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 (512) 422-9036 to get you started.
Want to know more about refinancing your home? Give us a call: (512) 422-9036.
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