When is Refinancing Worth it?

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Some have said that only in the case your new interest is at least two points under your current rate, should you refinance your loan. That may have been valid a while back, but with the fact that refinancing has been costing less over the last few years, it's a good time to explore the options of a new mortgage! Refinancing your mortgage has a variety of benefits that will often make it worth the initial cost many times over.

Benefits from Refinancing

When you refinance, you may have the ability to lower the interest rate and mortgage payment , sometimes considerably. Additionally, you might be given the option of tapping into the equity in your property by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also get the chance to build up home equity faster by switching to a shorter term mortgage loan.

Expenses and Fees

Of course, you'll have to pay for your process of refinancing. You'll be charged the same types of expenses and fees as with your current home loan. These may include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Do the Math

Paying points can result in a better interest rate. The amount you will save over the life of the mortgage could be significant if you have paid up front about three percent of the new loan balance. You may be told that these points may be tax deductible, but as tax regulations can be difficult to keep up with, we urge you to speak with your tax professional before making any decisions based on this.

An additional expense that borrowers might take into account is that a reduced interest rate will lower the interest amount you will be able to deduct from your taxes. Call us at (860) 658-7100 to help you do the math.

In the end, for most people the total of up-front costs to refinance will be made up very quickly in monthly savings. We will help you figure out what mortgage program is best for you, considering your cash on hand, the likelihood of selling your home in the next few years, and how refinancing might effect your taxes. Call us at (860) 658-7100 to get started.

Curious about refinancing? Give us a call: (860) 658-7100.