Is Refinancing Worth the Cost?
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It has been said that only in the case your new interest is at least two points under your current rate, should you refinance your loan. That might have been true a while back, but since refinancing has been costing less recently, it's never the wrong time to consider a new mortgage loan! A refinance is often worth its cost several times over, because of the benefits that can come, as well as a reduced interest rate.
Benefits from Refinancing
When you refinance, you may be able to lower the interest rate and mortgage payment , perhaps significantly. You may also have the ability to "cash out" some of the built-up equity in your residence, which you are able use to consolidate debt, improve your home, or take a vacation. You may have the option to refinance to a shorter-term mortgage loan, giving you the ability to add to your equity faster.
Expenses and Fees
All these advantages do cost something, though. With your refinance, you're paying for a lot of the same things you paid for when you got your original mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
Paying points can help you attain a lower interest rate. If you pay (on average) 3% of the mortgage loan amount at the start, your savings for the life of the refinanced loan can be great. Please talk to a tax professional before acting on rumors that any paid points may be deducted on your taxes.
Another thing about taxes is that when your interest rate is reduced, naturally you'll also be reducing the interest amount that you can deduct on your federal income taxes. This is one more expense that some borrowers take into consideration. Call us at (860) 658-7100 to help you do the math.
Ultimately, for most borrowers the total of initial costs to refinance will be paid back very quickly in monthly savings. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at (860) 658-7100 to get you started.
Want to know more about refinancing? Give us a call: (860) 658-7100.