When is Refinancing Worth it?
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It has been said that only when your new interest is at least two points under your current rate, should you refinance your loan. Perhaps several years ago that was wise advice, but since refinance costs have been getting lower, it could be a good time to look into it. Refinancing has a variety of advantages that often make it worth the initial expenditure a few times over.
Advantages of Refinancing
You might be able to lower your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with your refinanced mortgage loan. You also may have the option of pulling out some of your home equity by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. You might be able to refinance to a shorter-term mortgage program, enabling you to add to your home equity faster.
Expenses and Fees
All these advantages do cost something, though. You will have the same types of expenses and fees as you did with your current mortgage loan. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You could need to pay discount points (prepaid interest) to get a lower rate of interest. When you pay (on average) 3% of the mortgage loan amount up front, the savings for the life of the refinanced mortgage loan can be great. You might have heard that points can be tax deductible, but since tax regulations are ever-changing, please consult with a tax professional before considering this in your calculations.
Another thing about taxes is that when your interest rate is reduced, of course you'll also be lowering the interest amount that you may deduct on your taxes. This is another cost that some borrowers take into consideration. Call us at (732) 969-9300 to help you do the math.
Most borrowers find that the monthly savings quickly outweigh the up-front expenses of refinancing. We will help you find out what mortgage program is ideal for you, considering your cash on hand, the likelihood of selling your residence in the near future, and what effect refinancing will probably have on your taxes. Call us at (732) 969-9300 to get you started.
Curious about refinancing? Call us at (732) 969-9300.