When is Refinancing Worth it?
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Some have said that only if your new interest will be at least 2 points below your current rate, should you refinance your mortgage. That might have been valid a while back, but since refinancing has been costing less over the last few years, it's never the wrong time to think about a new mortgage! A refinanced mortgage loan can be worth its cost several times over, factoring in the benefits that it brings, in addition to a reduced interest rate.
When you refinance, you might have the ability to reduce the interest rate and mortgage payment , perhaps considerably. You also might be given the option of pulling out some of your home equity by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. You could be able to refinance to a shorter-term mortgage program, giving you the ability to add to your equity faster.
Expenses and Fees
All these benefits do come with some expense, though. With your refinance, you're paying for a lot of the same things you paid for at the time you got your current mortgage. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
Paying points can help you get a lower interest rate. When you pay (on average) three percent of the mortgage loan amount initially, the savings for the life of the refinanced mortgage loan can be great. You might be told that these points can be deducted on your income taxes, but since tax regulations are difficult to keep up with, we urge you to consult a tax professional before considering this in your calculations.
Speaking of taxes, once you reduce your interest rate, it follows that you will also be lowering the paid interest amount that you'll be able to deduct on your taxes. This is one more cost that some borrowers consider. Call us at 952 417 8481 to help you do the math.
Ultimately, for most borrowers the total of up-front costs to refinance are made up very quickly in savings each month. We can help you explore your options, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your cash on hand. Call us at 952 417 8481 to get started.
Curious about refinancing your home? Give us a call at 952 417 8481.