Is Refinancing Worth the Cost?
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Have you ever heard the pearl of wisdom that says you should only refinance if the new interest rate is at least 2 points under your current one? That could have been valid years ago, but as refinancing has been costing less recently, it's a good time to consider a new mortgage loan! Refinancing your mortgage loan has a variety of advantages that can make it worth the initial cost a few times over.
When you refinance, you might be able to reduce the interest rate and monthly mortgage payment amount, perhaps by a lot. You also may be given the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With reduced interest rates, you may also get the chance to build your home equity faster by moving to a shorter-term mortgage loan.
Fees and Expenses
All of these benefits do cost something, though. When you refinance, you are paying for most of the same things you paid for during your original mortgage. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
You might consider paying points to be given a lower interest rate. When you pay (on average) 3% of the mortgage loan amount up front, your savings for the term of the refinanced mortgage loan can be significant. You may hear that these points can be tax deductible, but as tax regulations are ever-changing, we urge you to consult with your tax professional before making any decisions based on this.
Speaking of taxes, if you bring down your interest rate, naturally you will also be lowering the paid interest amount that you can deduct from your taxes. This is one more expense that borrowers take into account. We can help you do the math! Call us at (402) 502-9037.
All things considered, for most people the amount of initial costs to refinance are made up very quickly in savings each month. We can help you find out your options, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at (402) 502-9037 to get you started.
Want to know more about refinancing? Give us a call at (402) 502-9037.