When is Refinancing Worth it?
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It has been said that only if your new interest will be at least two points lower, should you refinance your mortgage. Perhaps that was sound advice a number of years ago, but as refinance costs have been falling recently, it could be a good time to take a serious look. Refinancing has a number of advantages that often make it worth the initial cost many times over.
You may be able to lower your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with a refinanced mortgage loan. Additionally, you may have the option of pulling out some of the equity in your property by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you may also get the chance to build your home equity more quickly by moving to a shorter-term mortgage loan.
All these advantages do come with some expense, though. With your refinance, you are paying for basically the same things you were charged for at the time you got your existing mortgage. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might think about paying points to reduce your interest rate. If you pay (on average) three percent of the loan amount at the start, the savings for the term of the refinanced mortgage can be substantial. You might be told that these points can be deducted on your income taxes, but because tax regulations can be ever-changing, please consult your tax professional before depending on this.
Another expense that borrowers might take into account is that a lower rate of interest will lower the interest amount you'll be able to deduct on your taxes. We can help you do the math! Call us at (732) 969-9300.
All things considered, for most borrowers the amount of up-front costs to refinance are made up soon in monthly savings. We will work with you to figure out which program is ideal for you, taking into account your cash on hand, how likely you are to sell your home in the next few years, and the effect refinancing will have on your taxes. Call us at (732) 969-9300 to get you started.
Want to know more about refinancing your home? Give us a call: (732) 969-9300.