When is Refinancing Worth it?
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It has been said that only if your new interest is at least 2 points below your current rate, should you refinance your mortgage. That could have been accurate a while back, but as refinancing has been costing less recently, it is a good time to explore the options of a new loan! A refinanced loan may be worth its cost several times over, factoring in the advantages that can come, along with a reduced interest rate.
You may be able to lower your interest rate (sometimes by a lot) and make smaller mortgage payments with a refinanced loan. Additionally, you might be given the option of tapping into the equity in your house by "cashing out" a sum of money to fix up your home, consolidate debt, or take your family on a vacation. With reduced rates, you might also be able to build up home equity more quickly by switching to a shorter term mortgage.
All these benefits do come with some expense, though. When you refinance, you are paying for basically the same things you paid for when you got your original mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying discount points can help you attain a better interest rate. If you pay (on average) 3% of the mortgage loan amount initially, your savings for the life of the refinanced mortgage loan can be significant. You may hear that the points may be tax deductible, but since tax regulations can be ever-changing, please consult a tax professional before making any decisions based on this.
Another cost that a borrower may take into account is that a lower rate of interest will lower the interest amount you'll deduct on your federal income taxes. Call us at 504-866-5626 to help you do the math.
Most people find that the savings each month quickly outweigh the up-front expenses of refinancing. We can help you figure out your options, considering the effect a refinance could have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 504-866-5626 to get started.
Curious about refinancing your home? Give us a call: 504-866-5626.
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