When is Refinancing Worth it?
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Have you ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate is at least 2 points under your existing rate? That might have been accurate years ago, but with refinancing dropping in cost in recent years, it's never the wrong time to think about a new loan! Refinancing your mortgage has some benefits that often make it worth the up-front expenditure many times over.
You could be able to bring down your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with your refinanced mortgage. You also could be given the option of pulling out some of the equity in your home by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. You might have the option to refinance into a shorter-term mortgage, giving you the ability to add to your equity faster.
Expenses and Fees
Of course, you will have some fees and expenses during your the refinance process. With your refinance, you are paying for a lot of the same things you paid for at the time you got your existing mortgage. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Do the Math
You might offer to pay points (prepaid interest) to gain a lower rate of interest. Your savings over the life of the loan might be significant if you have paid up front about three percent of the new loan balance. Please consult a tax professional before acting on advice that any points paid may be deducted on your federal income taxes.
An additional expense that a borrower might take into account is that a reduced interest rate will lower the interest amount you'll deduct from your federal income taxes. We can help you do the math! Call us at (732) 969-9300.
In the end, for most people the total of up-front costs to refinance are made up soon in monthly savings. We'll help you find out which program is right for you, taking into account your cash on hand, the likelihood of selling your house in the next few years, and how refinancing can effect your taxes. Call us at (732) 969-9300 to get started.
Want to know more about refinancing? Give us a call: (732) 969-9300.