Is Refinancing Worth the Cost?
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It has been said that only if your new interest is at least 2 points below your current rate, should you refinance your loan. That could have been accurate years ago, but with refinancing dropping in cost recently, it is never the wrong time to think about a new mortgage loan! Refinancing your mortgage has various advantages that can make it worth the initial cost a few times over.
Benefits from Refinancing
When you refinance, you might be able to lower the interest rate and monthly payment , perhaps by a lot. You also may have the option of pulling out some of your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. You might have the option to refinance to a shorter-term mortgage loan, enabling you to build up your home equity faster.
All of these advantages do come with some expense, though. With your refinance, you're paying for many of the same things you were charged for during your original mortgage. These might include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Do the Math
You could offer to pay discount points (prepaid interest) to attain a more favorable rate of interest. If you pay (on average) three percent of the mortgage loan amount at the start, your savings for the term of the refinanced mortgage can be significant. Please talk to a tax professional before acting on hear-say that the points paid can be deducted on your federal income taxes.
An additional cost that a borrower might take into account is that a lower interest rate will reduce the interest amount you'll be able to deduct on your federal income taxes. Call us at 248-644-1200 to help you do the math.
Most people find that the monthly savings outweigh the initial expenses of refinancing. We'll help you determine which program is ideal for you, considering your cash on hand, how likely you are to sell your home in the near future, and the effect refinancing could have on your taxes. Call us at 248-644-1200 to get started.
Curious about refinancing? Give us a call: 248-644-1200.
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