Is Refinancing Worth the Cost?
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Ever hear the old rule of thumb that says you should only refinance if the new interest rate will be at least 2 points below your existing rate? That might have been accurate a while back, but with the fact that refinancing has been costing less over the last few years, it's a good time to think about a new loan! A refinanced mortgage loan can be worth its cost several times over, factoring in the benefits that it brings, along with a reduced interest rate.
You may be able to lower your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with your refinanced loan. Additionally, you might have the option of tapping into the equity in your home by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. You may be able to refinance into a shorter-term mortgage loan, giving you the ability to add to your equity faster.
All of these advantages do come with some expense, though. When you refinance, you are paying for many of the same things you paid for at the time you got your existing mortgage. These may include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might investigate paying points to be given a reduced interest rate. When you pay (on average) 3% of the loan amount at the start, the savings for the term of the refinanced loan can be significant. You might hear that the points may be tax deductible, but because tax regulations can be difficult to keep up with, we urge you to consult with a tax professional before considering this in your calculations.
Speaking of taxes, if you reduce your interest rate, naturally you'll also be lowering the interest amount that you can deduct on your federal income taxes. This is one more expense that some borrowers take into consideration. Call us at 941-924-0044 to help you do the math.
Most people find that the monthly savings quickly outweigh the up-front expenses of refinancing. We can help you find out your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at 941-924-0044 to get you started.
Want to know more about refinancing? Give us a call at 941-924-0044.