When is Refinancing Worth it?

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Ever hear the old rule of thumb that states you should only consider refinancing if your new interest rate is at least two points below your current one? Maybe several years ago that was wise advice, but since refinance costs have been getting lower, it may be a good time to take a serious look. A refinance may be worth its cost several times over, factoring in the advantages that it brings, along with a reduced interest rate.

Benefits

When you refinance, you might be able to lower your interest rate and mortgage payment , sometimes considerably. You may also be able to "cash out" some of your equity, which you may use to consolidate debt, add on to your home, or plan a vacation. With reduced rates, you might also be able to build up home equity more quickly by switching to a shorter term loan.

Fees and Expenses

All these benefits do cost something, though. When you refinance, you're paying for basically the same things you were charged for at the time you got your current mortgage loan. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might think about paying points to be given a better interest rate. Your savings over the life of the mortgage could be substantial if you've paid up front about three percent of the new loan balance. Please talk to a tax professional before acting on hear-say that these points paid can be deducted on your federal income taxes.

Another thing about taxes is that when you lower your interest rate, it follows that you'll also be reducing the paid interest amount that you'll be able to deduct from your federal income taxes. This is another expense that some borrowers take into consideration. Call us at 504-866-5626 to help you do the math.

Most people find that the monthly savings quickly balance out the up-front expenses of a refinance. We can help you figure out your options, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the next couple of years, and your money on hand. Call us at 504-866-5626 to get started.

Want to know more about refinancing? Call us: 504-866-5626.

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