When is Refinancing Worth it?
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Ever hear the pearl of wisdom that states you should only consider refinancing if your new interest rate is at least 2 points below your existing rate? Perhaps that was good advice several years ago, but as refinance costs have been falling recently, it may be time to look into it. A refinance may be worth its cost several times over, because of the advantages that it brings, in addition to a reduced interest rate.
Advantages of Refinancing
When you refinance, you could have the ability to reduce your interest rate and mortgage payment amount, perhaps considerably. You also could have the option of tapping into the equity in your home by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. With lower rates, you might also get the chance to build your home equity faster by changing to a shorter-term mortgage loan.
Expenses and Fees
As you probably know, you'll have some fees and expenses during your process of refinancing. With your refinance, you are paying for basically the same things you were charged for at the time you obtained your original mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Do the Math
Paying points can get you a lower interest rate. If you pay (on average) three percent of the mortgage loan amount initially, your savings for the life of the new loan can be significant. You may have heard that these points may be tax deductible, but as tax regulations are ever-changing, please consult your tax professional before considering this in your calculations.
Another expense that a borrower may consider is that a lower interest rate will reduce the interest amount you'll deduct on your taxes. We can help you do the math! Call us at 219-548-2255.
Ultimately, for most people the total of initial costs to refinance are paid back very quickly in monthly savings. We can help you explore what your options are, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at 219-548-2255 to get started.
Want to know more about refinancing? Give us a call at 219-548-2255.