Is Refinancing Worth the Cost?
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Ever hear the pearl of wisdom that states you should only refinance if your new interest rate will be at least two points under your current rate? That might have been accurate years ago, but since refinancing has been costing less in recent years, it's a good time to explore the options of a new loan! A refinance is often worth its cost many times over, factoring in the advantages that come, as well as a lower interest rate.
When you refinance, you might be able to reduce the interest rate and monthly mortgage payment , perhaps significantly. You could also have the ability to "cash out" a portion of the built-up equity in your residence, which you may use to consolidate debt, improve your home, or plan a vacation. With reduced interest rates, you might also get the chance to build your home equity more quickly by switching to a shorter term mortgage.
Fees and Expenses
Of course, you'll have some fees and expenses during your the refinance process. With your refinance, you're paying for basically the same things you were charged for during your current mortgage loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might need to pay points (prepaid interest) to gain a more favorable interest rate. When you pay (on average) 3% of the mortgage loan amount at the start, the savings for the life of the new loan can be great. You might be told that these points can be tax deductible, but because tax regulations can be ever-changing, we urge you to consult your tax professional before depending on this.
Speaking of taxes, if you lower your interest rate, naturally you will also be lowering the interest amount that you will be able to deduct on your federal income taxes. This is one more expense that borrowers take into account. We can help you do the math! Call us at 208-941-3337.
In the end, for most people the amount of up-front costs to refinance will be paid back very quickly in monthly savings. We can help you explore what your options are, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your money on hand. Call us at 208-941-3337 to get started.
Want to know more about refinancing? Call us: 208-941-3337.