When is Refinancing Worth it?
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Some have said that only when your new interest is at least 2 points under your current rate, should you refinance your mortgage. That may have been accurate years ago, but as refinancing has been costing less over the last few years, it's a good time to explore the options of a new loan! A refinance can be worth its cost several times over, factoring in the advantages that may come, as well as a reduced interest rate.
Benefits from Refinancing
When you refinance, you may have the ability to lower the interest rate and monthly payment , perhaps by a lot. You also might have the option of tapping into your home equity by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. You may have the option to refinance to a shorter-term mortgage loan, enabling you to build up your home equity faster.
Fees and Expenses
All of these benefits do come with some expense, though. When you refinance, you are paying for a lot of the same things you paid for when you got your existing mortgage. These probably include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
Paying discount points can help you get a lower interest rate. When you pay (on average) three percent of the loan amount up front, your savings for the term of the refinanced loan can be substantial. You may have heard that these points can be deducted on your income taxes, but because tax regulations are difficult to keep up with, we urge you to consult with your tax professional before depending on this.
Another thing about taxes is that once your interest rate is reduced, of course you'll 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 (281) 778-0805.
All things considered, for most borrowers the amount of up-front costs to refinance will be paid back very quickly in monthly savings. 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 next couple of years, and your available cash. Call us at (281) 778-0805 to get you started.
Curious about refinancing? Call us at (281) 778-0805.