Is Refinancing Worth the Cost?
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Ever heard the old rule of thumb that states you should only refinance if the new interest rate will be at least 2 points below your existing rate? That might have been true years ago, but with refinancing dropping in cost in recent years, it's never the wrong time to explore the options of a new mortgage loan! Refinancing your loan has various benefits that often make it worth the up-front expenditure many times over.
When you refinance, you could have the ability to lower your interest rate and monthly payment , sometimes by a lot. You could also be able to "cash out" a portion of the built-up equity in your residence, which you are able use to take care of higher interest debt, improve your home, or take a vacation. With reduced interest rates, you might also be able to build up home equity faster by changing to a shorter term loan.
Fees and Expenses
All these benefits do cost something, though. You'll have to pay the same types of fees as you did with your present mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You could offer to pay discount points (prepaid interest) to get a lower interest rate. Your savings over the life of the loan could be substantial if you have paid up front about three percent of the new loan balance. You may be told that the points can be tax deductible, but as tax regulations are difficult to keep up with, we urge you to consult a tax professional before considering this in your calculations.
Speaking of taxes, when your interest rate is reduced, naturally you'll also be lowering the paid interest amount that you will be able to deduct from your taxes. This is one more cost that borrowers consider. Call us at 504-866-5626 to help you do the math.
Most borrowers find that the monthly savings quickly outweigh the initial expenses of a refinance. We will work with you to find out what mortgage program is right for you, considering your cash on hand, how likely you are to sell your house in the near future, and what effect refinancing will have on your taxes. Call us at 504-866-5626 to get you started.
Curious about refinancing? Give us a call: 504-866-5626.
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