Is Refinancing Worth the Cost?
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Ever hear the old rule of thumb that says you should only consider refinancing if your new interest rate is at least 2 points lower than your present one? Perhaps that was good advice a number of years ago, but since refinance costs have been getting lower, it may be time to look into it. A refinance may be worth its cost several times over, because of the benefits that it brings, in addition to a lower interest rate.
When you refinance, you could be able to lower the interest rate and monthly payment amount, perhaps considerably. You may also be able to "cash out" some of your equity, that you may use to take care of higher interest debts, add on to your home, or finance a vacation. With lower interest rates, you might also get the chance to build up home equity more quickly by moving to a shorter term mortgage.
Expenses and Fees
All of these benefits do cost something, though. With your refinance, you are paying for a lot of the same things you paid for when you obtained your existing mortgage loan. Included in the list will probably 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 initially, your savings for the term of the new loan can be substantial. Please consult with a tax professional before acting on advice that these points paid may be deducted on your federal income taxes.
Another thing about taxes is that once your interest rate is reduced, it follows that you will also be lowering the interest amount that you will be able to deduct from your federal income taxes. This is another expense that some borrowers take into account. We can help you do the math! Call us at (303) 228-2254.
Most people find that the savings each month quickly balance out the up-front expenses of refinancing. We can help you find out what your options are, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the near future, and your cash on hand. Call us at (303) 228-2254 to get you started.
Curious about refinancing your home? Call us: (303) 228-2254.