Is Refinancing Worth the Cost?
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Have you ever heard the old rule of thumb that says you should only consider refinancing if the new interest rate is at least 2 points under your present one? Maybe several years ago that was wise advice, but since refinance costs have been falling recently, it could be time to take a serious look. Refinancing has various advantages that will often make it worth the initial cost several times over.
Benefits from Refinancing
You could be able to lower your interest rate (sometimes significantly) and make smaller monthly payments with a refinanced loan. You might also be able to "cash out" a portion of your equity, that you are able use to consolidate debts, make home improvements, or finance a vacation. You could be able to refinance into a shorter-term mortgage, enabling you to build up your home equity faster.
Expenses and Fees
All these benefits do cost something, though. When you refinance, you're paying for basically the same things you were charged for during your original mortgage loan. These might include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Do the Math
Paying discount points can help you attain a better interest rate. Your savings over the life of the mortgage might be substantial if you've paid up front about 3% of the new loan total. Please talk to a tax professional before acting on advice that these points paid may be deducted on your taxes.
Another expense that a borrower may take into account is that a reduced rate of interest will lower the interest amount you'll be able to deduct from your taxes. We can help you do the math! Call us at 248-644-1200.
Most people find that the monthly savings balance out the up-front cost of refinancing. We can help you explore your options, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at 248-644-1200 to get started.
Curious about refinancing your home? Give us a call: 248-644-1200.
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