When is Refinancing Worth it?
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Some have said that only when your new interest is at least two points under your current rate, should you refinance your mortgage. That could have been good advice years ago, but with refinancing dropping in cost in recent years, it's never the wrong time to explore the options of a new mortgage! Refinancing your mortgage loan has various advantages that will often make it worth the up-front expenditure a few times over.
Advantages of Refinancing
When you refinance, you may have the ability to reduce the interest rate and monthly payment , perhaps by a lot. You also might be given the option of pulling out some of 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 get the chance to build up home equity more quickly by switching to a shorter term mortgage.
Fees and Expenses
All of these benefits do cost something, though. When you refinance, you are paying for a lot of the same things you paid for during your current mortgage. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying discount points can result in a lower interest rate. When you pay (on average) 3% of the loan amount up front, your savings for the life of the new mortgage loan can be great. You may be told that the points may be tax deductible, but as tax regulations are difficult to keep up with, please consult your tax professional before depending on this.
Another cost that a borrower might take into account is that a reduced rate of interest will lower the interest amount you'll be able to deduct on your federal income taxes. Call us at 703.255-5810 to help you do the math.
Most people find that the monthly savings quickly balance out the initial expenses of refinancing. We can help you explore what your options are, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 703.255-5810 to get started.
Want to know more about refinancing your home? Give us a call at 703.255-5810.