When is Refinancing Worth it?
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Some have said that only when your new interest is at least two points under your current rate, should you refinance your mortgage. That could have been good advice years ago, but as refinancing has been costing less recently, it's never the wrong time to consider a new loan! A refinanced mortgage may be worth its cost many times over, factoring in the advantages that can come, as well as a lower interest rate.
When you refinance, you may be able to lower the interest rate and monthly mortgage payment amount, perhaps by a lot. You also could have the option of pulling out some of the equity in your house by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. You might be able to refinance into a shorter-term mortgage, giving you the ability to build your equity quicker.
As you probably expect, you will have to pay for your the refinance process. When you refinance, you are paying for a lot of the same things you were charged for during your existing mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Do the Math
Paying discount points can help you attain a lower interest rate. If you pay (on average) 3% of the loan amount up front, the savings for the term of the refinanced mortgage can be substantial. You may hear that these points can be tax deductible, but because tax regulations are ever-changing, please consult with a tax professional before depending on this.
Another cost that a borrower may consider is that a lower interest rate will lower the interest amount you will be able to deduct on your taxes. Call us at (860) 658-7100 to help you do the math.
Ultimately, for most the amount of initial costs to refinance are paid back very quickly in savings each month. We will work with you to find out what program is ideal for you, looking at your cash on hand, how likely you are to sell your house in the near future, and what effect refinancing will have on your taxes. Call us at (860) 658-7100 to get you started.
Curious about refinancing your home? Give us a call at (860) 658-7100.