When is Refinancing Worth it?

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Some have said that only in the case your new interest will be at least 2 points under your current rate, should you refinance your mortgage. Maybe that was good advice several years ago, but as refinance costs have been getting lower, it could be time to take a serious look. Refinancing has a number of benefits that can make it worth the up-front cost a few times over.

Benefits

You could be able to bring down your interest rate (sometimes substantially) and make smaller mortgage payments with your refinanced mortgage loan. You may also be able to "cash out" some of the built-up equity in your residence, that you can use to take care of higher interest debts, make home improvements, or plan a vacation. With lower interest rates, you may also get the chance to build your home equity more quickly by switching to a shorter-term mortgage loan.

Expenses and Fees

All of these advantages do come with some expense, though. You'll have the same kinds of fees as you did with your current mortgage. These might include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Do the Math

You might offer to pay discount points (prepaid interest) to get a better interest rate. Your savings over the life of the loan might be significant if you have paid up front about 3% of the new loan total. You might be told that the points may be tax deductible, but because tax regulations are ever-changing, please consult with a tax professional before depending on this.

Speaking of taxes, if your interest rate is reduced, naturally you'll also be reducing the interest amount that you will be able to deduct from your federal income taxes. This is one more expense that borrowers consider. We can help you do the math! Call us at (860) 658-7100.

Ultimately, for most borrowers the amount of up-front costs to refinance will be made up very quickly in monthly savings. We'll work with you to figure out which mortgage program is the ideal fit for you, considering your cash on hand, how likely you are to sell your home in the next few years, and how refinancing might effect your taxes. Call us at (860) 658-7100 to get started.

Want to know more about refinancing your home? Call us at (860) 658-7100.