Is Refinancing Worth the Cost?
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Ever hear the pearl of wisdom that says you should only refinance if your new interest rate will be at least two points lower than your current one? That could have been good advice years ago, but with refinancing dropping in cost over the last few years, it is never the wrong time to consider a new mortgage! A refinanced loan is often worth its cost many times over, factoring in the benefits that come, in addition to a lower interest rate.
You might be able to lower your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with your refinanced mortgage. Additionally, you might have the option of tapping into your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or take your family on a vacation. You could have the option to refinance into a shorter-term mortgage program, giving you the ability to add to your home equity quicker.
Expenses and Fees
Of course, you'll have some fees and expenses during your the refinance process. When you refinance, you're paying for a lot of the same things you were charged for during your original mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
Paying points can get you a lower interest rate. If you pay (on average) three percent of the mortgage loan amount at the start, the savings for the life of the new mortgage loan can be substantial. We recommend that you consult with a tax professional before acting on rumors that any paid points may be deducted on your taxes.
One more cost that a borrower may consider is that a reduced rate of interest will lower the interest amount you will deduct from your taxes. Call us at 603-893-6616 to help you do the math.
Most people find that the savings each month quickly outweigh the initial cost of refinancing. We will work with you to figure out which mortgage loan program is perfect for you, taking into account your cash on hand, how likely you are to sell your residence in the next few years, and what effect refinancing will have on your taxes. Call us at 603-893-6616 to get you started.
Want to know more about refinancing? Call us: 603-893-6616.