Is Refinancing Worth the Cost?
It has been said that only in the case your new interest will be at least 2 points under your current rate, should you refinance your mortgage. That could have been accurate years ago, but since refinancing has been costing less recently, it’s never the wrong time to explore the options of a new mortgage! A refinance is often worth its cost several times over, factoring in the benefits that come, along with a lower interest rate.
Benefits
When you refinance, you could have the ability to lower your interest rate and mortgage payment amount, sometimes considerably. You might also be able to “cash out” a portion of your home equity, that you may use to consolidate debts, add on to your home, or take a vacation. With reduced rates, you might also be able to build your home equity more quickly by moving to a shorter term loan.
Expenses and Fees
As you probably know, you will have to pay for the process of refinancing. When you refinance, you’re paying for basically the same things you were charged for at the time you obtained your original mortgage. Included in your costs may be an appraisal, underwriting fees, lender’s title insurance, settlement costs, and other expenses.
Do the Math
You might need to pay points (prepaid interest) to gain a more favorable rate of interest. Your savings over the life of the loan could be substantial if you have paid up front about 3% of the new loan balance. You may hear that the points may be deducted on your income taxes, but because tax regulations are ever-changing, we urge you to consult with a tax professional before depending on this.
Another expense that borrowers may consider is that a lower interest rate will lower the interest amount you’ll be able to deduct on your taxes. We can help you do the math! Call us at 661.324.2427.
Most borrowers find that the savings each month outweigh the up-front expenses of refinancing. We will work with you to determine what loan program is ideal for you, considering your cash on hand, how likely you are to sell your house in the next few years, and how refinancing could effect your taxes. Call us at 661.324.2427 to get started.