When is Refinancing Worth it?

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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 might have been sound advice a while back, but with refinancing dropping in cost over the last few years, it is a good time to explore the options of a new loan! A refinance may be worth its cost many times over, because of the benefits that it brings, in addition to a lower interest rate.

Advantages

You may be able to bring down your interest rate (sometimes by a lot) and have smaller mortgage payments with a refinanced mortgage loan. You might also have the ability to "cash out" a portion of the built-up equity in your home, that you will be able use to consolidate debts, make home improvements, or plan a vacation. With lower interest rates, you might also be able to build up home equity faster by switching to a shorter term mortgage.

Expenses and Fees

As you probably expect, you will have to pay for the process of refinancing. With your refinance, you're paying for many of the same things you were charged for when you got your current mortgage loan. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

Do the Math

You might offer to pay points (prepaid interest) to gain a more favorable interest rate. If you pay (on average) three percent of the loan amount at the start, your savings for the life of the refinanced mortgage loan can be great. Please talk to a tax professional before acting on hear-say that these paid points can be deducted on your taxes.

Speaking of taxes, when your interest rate is reduced, of course you will also be reducing the interest amount that you may deduct on your taxes. This is one more cost that some borrowers take into consideration. We can help you do the math! Call us at 248-644-1200.

In the end, for most borrowers the amount of initial costs to refinance will be paid back very quickly in savings each month. We can help you explore your options, considering the effect a refinance could have on your taxes, how likely you may be to sell in the near future, and your cash on hand. Call us at 248-644-1200 to get you started.

Curious about refinancing? Give us a call at 248-644-1200.

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