When is Refinancing Worth it?
Want to know more about refinancing your home? Give us a call: 940-781-9396
It has been said that only when your new interest will be at least 2 points lower, should you refinance your loan. Maybe several years ago that was sage advice, but since refinance costs have been falling recently, it could be a good time to take a serious look. Refinancing has some advantages that can make it worth the initial expenditure many times over.
Benefits from Refinancing
You could be able to bring down your interest rate (sometimes by a lot) and make smaller monthly payments with a refinanced mortgage loan. Additionally, you may be given the option of tapping into your home equity by "cashing out" some money to fix up your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also get the chance to build up home equity faster by moving to a shorter term mortgage loan.
Expenses and Fees
All of these advantages do cost something, though. When you refinance, you're paying for basically the same things you paid for during your current mortgage. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
You could have to pay a penalty for refinancing your present loan too soon. This depends on the rules of your present mortgage loan. These penalties might just apply for the first couple of years. We'll help you with the details: contact us at 940-781-9396.
Doing the Math
You might investigate paying points to be given a better interest rate. Your savings over the life of the mortgage loan could be significant if you have paid up front about three percent of the new loan balance. You may be told that these points may be deducted on your income taxes, but since tax regulations can be ever-changing, please consult a tax professional before considering this in your calculations.
Another thing about taxes is that if your interest rate is reduced, naturally you will also be lowering the paid interest amount that you'll be able to deduct from your taxes. This is one more expense that borrowers take into consideration. Call us at 940-781-9396 to help you do the math.
All things considered, for most borrowers the total of initial costs to refinance will be paid back soon in savings each month. We will help you determine what loan program is the ideal fit for you, taking into account your cash on hand, how likely you are to sell your house in the next few years, and how refinancing might effect your taxes. Call us at 940-781-9396 to get started.