Is Refinancing Worth the Cost?
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Some have said that only when your new interest will be at least two points lower, should you refinance your loan. Perhaps several years ago that was good advice, but since refinance costs have been getting lower, it may be a good time to look into it. Refinancing your mortgage has a variety of advantages that often make it worth the initial cost a few times over.
You may be able to lower your interest rate (sometimes substantially) and make smaller mortgage payments with your refinanced mortgage loan. You could also have the ability to "cash out" a portion of the built-up equity in your residence, which you may use to take care of higher interest debt, add on to your home, or finance a vacation. You may have the option to refinance to a shorter-term mortgage, enabling you to build your equity faster.
All these advantages do cost something, though. When you refinance, you are paying for basically the same things you were charged for when you got your current mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
Paying discount points can result in a better interest rate. Your savings over the life of the mortgage loan may be significant if you've paid up front about 3% of the new loan total. You may have heard that the points can be tax deductible, but as tax regulations can be difficult to keep up with, we urge you to speak with a tax professional before considering this in your calculations.
One more cost that borrowers may consider is that a lower rate of interest will lower the interest amount you'll deduct from your taxes. We can help you do the math! Call us at 504-866-5626.
Most borrowers find that the monthly savings quickly outweigh the up-front cost of refinancing. We will work with you to determine which loan program is right for you, considering your cash on hand, how likely you are to sell your home in the near future, and the effect refinancing could have on your taxes. Call us at 504-866-5626 to get you started.
Want to know more about refinancing? Give us a call at 504-866-5626.
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