When is Refinancing Worth it?
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Ever heard the old rule of thumb that states you should only refinance if your new interest rate will be at least two points under your present rate? That may have been valid a while back, but with refinancing dropping in cost in recent years, it is a good time to explore the options of a new mortgage! Refinancing your loan has a number of benefits that can make it worth the initial expenditure many times over.
You may be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with a refinanced mortgage loan. You also could be given the option of tapping into the equity in your house by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. With reduced rates, you may also be able to build up home equity faster by changing to a shorter-term loan.
Expenses and Fees
All these advantages do come with some expense, though. You'll pay the same kinds of fees as you did with your current mortgage loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
Paying discount points can result in a lower interest rate. Your savings on the life of the mortgage might be substantial if you've paid up front about 3% of the new loan total. You might be told that the points can be deducted on your income taxes, but as tax regulations can be difficult to keep up with, we urge you to consult your tax professional before considering this in your calculations.
Another thing about taxes is that if your interest rate is lowered, it follows that you will also be reducing the interest amount that you may deduct from your taxes. This is one more expense that borrowers consider. We can help you do the math! Call us at 504-866-5626.
All things considered, for most people the amount of up-front costs to refinance will be made up soon in savings each month. We'll help you determine what mortgage loan program is best for you, taking into account your cash on hand, the likelihood of selling your home in the near future, and how refinancing can effect your taxes. Call us at 504-866-5626 to get you started.
Want to know more about refinancing? Call us at 504-866-5626.
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