When is Refinancing Worth it?
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Some have said that only when your new interest is at least two points lower, should you refinance your loan. That might have been good advice years ago, but as refinancing has been costing less in recent years, it is never the wrong time to explore the options of a new mortgage! Refinancing has a number of advantages that often make it worth the initial expenditure a few times over.
You could be able to bring down your interest rate (sometimes significantly) and make smaller monthly payments with your refinanced mortgage loan. Additionally, you might be given the option of tapping into your home equity by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. With reduced rates, you might also get the chance to build up home equity faster by switching to a shorter-term loan.
Expenses and Fees
Of course, you will have some fees and expenses during the the refinance process. You'll be charged the same sort of fees as with your current mortgage. Included in the list will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying discount points can result in a lower interest rate. When you pay (on average) 3% of the loan amount up front, your savings for the term of the new mortgage can be significant. You may hear that the points can be deducted on your income taxes, but since tax regulations can be ever-changing, please consult with a tax professional before making decisions based on this.
Another thing about taxes is that if your interest rate is reduced, it follows that you will also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is another expense that some borrowers consider. We can help you do the math! Call us at 205-941-1484.
Most borrowers find that the monthly savings quickly balance out the up-front expenses of a refinance. We will work with you to figure out what mortgage program is perfect for you, taking into account your cash on hand, how likely you are to sell your residence in the near future, and how refinancing will effect your taxes. Call us at 205-941-1484 to get you started.
Curious about refinancing? Give us a call at 205-941-1484.