When is Refinancing Worth it?
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It has been said that only if your new interest will be at least two points lower, should you refinance your loan. That may have been true a while back, but with the fact that refinancing has been costing less recently, it's never the wrong time to think about a new mortgage loan! Refinancing has a number of benefits that can make it worth the up-front expenditure a few times over.
You may be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with your refinanced mortgage loan. You also may have the option of pulling out some of the equity in your home by "cashing out" some funds to renovate your home, consolidate debt, or plan a special vacation. With lower rates, you may also be able to build your home equity faster by switching to a shorter term mortgage loan.
As you probably know, you will have to pay for your process of refinancing. When you refinance, you are paying for basically the same things you were charged for at the time you obtained your existing mortgage loan. Among these can be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might need to pay points (prepaid interest) to gain a better rate of interest. If you pay (on average) 3% of the mortgage loan amount initially, the savings for the life of the new mortgage can be great. Please consult a tax professional before acting on rumors that these points paid can be deducted on your federal income taxes.
An additional expense that borrowers may consider is that a reduced interest rate will lower the interest amount you will deduct from your federal income taxes. Call us at (860) 658-7100 to help you do the math.
All things considered, for most the total of initial costs to refinance will be paid back soon in savings each month. We will help you figure out which loan program is ideal for you, looking at your cash on hand, the likelihood of selling your house 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? Call us at (860) 658-7100.