Is Refinancing Worth the Cost?
|In the market for a mortgage? We will be glad to assist you! Give us a call today at 719-425-2226. Want to get started? Apply Online Now.|
Ever hear the old rule of thumb that says you should only refinance if your new interest rate is at least 2 points below your current one? That could have been true years ago, but with refinancing dropping in cost over the last few years, it is never the wrong time to consider a new mortgage loan! Refinancing has some advantages that will often make it worth the initial expenditure several times over.
Benefits from Refinancing
You may be able to lower your interest rate (sometimes substantially) and reduce your monthly payment amount with a refinanced mortgage. You may also have the option to "cash out" a portion of your home equity, which you can use to consolidate debt, add on to your home, or plan a vacation. With reduced rates, you may also get the chance to build your home equity more quickly by switching to a shorter-term loan.
All of these advantages do cost something, though. When you refinance, you are paying for a lot of the same things you paid for during your existing mortgage. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Do the Math
You might need to pay discount points (prepaid interest) to attain a lower rate of interest. Your savings on the life of the mortgage loan may be substantial if you've paid up front about 3% of the new loan total. Please consult a tax professional before acting on hear-say that these points paid may be deducted on your taxes.
An additional expense that a borrower may take into account is that a reduced rate of interest will reduce the interest amount you'll be able to deduct from your taxes. We can help you do the math! Call us at 719-425-2226.
Ultimately, for most people the total of initial costs to refinance will be made up very quickly in monthly savings. We can help you explore your options, 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 719-425-2226 to get you started.