When is Refinancing Worth it?

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Some have said that only in the case your new interest is at least 2 points below your current rate, should you refinance your loan. That may have been true a while back, but with refinancing dropping in cost recently, it is never the wrong time to think about a new mortgage! Refinancing has various benefits that will often make it worth the up-front cost many times over.

Advantages of Refinancing

You may be able to lower your interest rate (sometimes substantially) and reduce your mortgage payment amount with a refinanced loan. You could also be able to "cash out" a portion of the built-up equity in your home, which you will be able use to take care of higher interest debts, improve your home, or finance a vacation. You could be able to refinance to a shorter-term mortgage loan, giving you the ability to build up your equity quicker.

Expenses and Fees

As you probably expect, you'll have some fees and expenses during the process of refinancing. With your refinance, you're paying for basically the same things you were charged for during your current mortgage. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might need to pay discount points (prepaid interest) to attain a better rate of interest. The money you will save over the life of the loan might be substantial if you have paid up front about three percent of the new loan total. We recommend that you consult with a tax professional before acting on rumors that any paid points can be deducted on your federal income taxes.

Another thing about taxes is that when your interest rate is reduced, it follows that you'll also be lowering the paid interest amount that you will be able to deduct from your taxes. This is another cost that borrowers take into account. Call us at 504-866-5626 to help you do the math.

In the end, for most the amount of initial costs to refinance are made up very quickly in monthly savings. We can help you explore what your options are, considering the effect a refinance could have on your taxes, how likely you may be to sell 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? Give us a call at 504-866-5626.

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