When is Refinancing Worth it?
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Ever hear the old rule of thumb that states you should only refinance if your new interest rate will be at least two points below your existing rate? That might have been good advice a while back, but as refinancing has been costing less over the last few years, it is never the wrong time to think about a new loan! Refinancing your loan has various benefits that will often make it worth the initial cost a few times over.
When you refinance, you might have the ability to lower your interest rate and monthly payment , sometimes significantly. You may also be able to "cash out" a portion of the built-up equity in your home, which you will be able use to consolidate debts, improve your home, or finance a vacation. You might be able to refinance into a shorter-term mortgage program, enabling you to build your equity faster.
Fees and Expenses
All these advantages do cost something, though. With your refinance, you are paying for a lot of the same things you paid for during your current mortgage loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying points can get you a lower interest rate. Your savings over the life of the mortgage may be substantial if you have paid up front about 3% of the new loan total. We recommend that you consult with a tax professional before acting on advice that any points paid can be deducted on your taxes.
Speaking of taxes, once your interest rate is reduced, it follows that you'll also be reducing the interest amount that you'll be able to deduct on your taxes. This is one more expense that borrowers take into account. Call us at (860) 658-7100 to help you do the math.
All things considered, for most people the amount of up-front costs to refinance will be paid back very quickly in monthly savings. We can help you figure out your options, considering the effect a refinance might 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 (860) 658-7100 to get started.
Want to know more about refinancing? Call us at (860) 658-7100.