When is Refinancing Worth it?
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It has been said that only when your new interest will be at least two points under your current rate, should you refinance your loan. Maybe several years ago that was wise advice, but since refinance costs have been falling recently, it may be a good time to look into it. Refinancing has a variety of advantages that can make it worth the initial cost many times over.
You could be able to bring down your interest rate (sometimes substantially) and have smaller mortgage payments with your refinanced mortgage loan. You might also have the ability to "cash out" a portion of the built-up equity in your home, which you can use to take care of higher interest debt, add on to your home, or plan a vacation. You could have the option to refinance into a shorter-term mortgage, enabling you to build up your home equity quicker.
All of these advantages do come with some expense, though. You will be charged the same kinds of fees as with your present home loan. These can include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
You might think about paying points to reduce your interest rate. The amount you will save over the life of the mortgage loan may be significant if you have paid up front about three percent of the new loan total. We recommend that you consult with a tax professional before acting on hear-say that any points paid can be deducted on your federal income taxes.
Another thing about taxes is that once you bring down your interest rate, of course you'll also be reducing the paid interest amount that you can deduct from your taxes. This is one more expense that borrowers take into consideration. Call us at (303) 228-2254 to help you do the math.
Most borrowers find that the savings per month quickly balance out the up-front cost of a refinance. We'll work with you to determine what program is the best fit for you, considering your cash on hand, the likelihood of selling your house in the next few years, and how refinancing could effect your taxes. Call us at (303) 228-2254 to get started.
Want to know more about refinancing your home? Call us: (303) 228-2254.