When is Refinancing Worth it?

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Ever heard the old rule of thumb that states you should only refinance if the new interest rate is at least two points under your existing one? Perhaps several years ago that was sage advice, but since refinance costs have been falling recently, it may be a good time to look into it. A refinance is often worth its cost several times over, because of the advantages that it brings, as well as a lower interest rate.

Benefits

You may be able to lower your interest rate (sometimes substantially) and reduce your monthly payment amount with a refinanced mortgage loan. You might also have the option to "cash out" a portion of the built-up equity in your residence, that you may use to consolidate debts, improve your home, or finance a vacation. You could have the option to refinance into a shorter-term mortgage loan, giving you the ability to build up your home equity quicker.

Expenses and Fees

As you probably expect, you'll have to pay for your the refinance process. With your refinance, you are paying for most of the same things you were charged for at the time you got your current mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You could need to pay discount points (prepaid interest) to attain a better rate of interest. The amount you'll save on the life of the mortgage could be substantial if you've paid up front about three percent of the new loan balance. You may hear that these points may be deducted on your income taxes, but since tax regulations can be difficult to keep up with, please consult with a tax professional before making any decisions based on this.

Speaking of taxes, once you lower your interest rate, of course you'll also be lowering the interest amount that you will be able to deduct from your federal income taxes. This is another expense that borrowers take into account. We can help you do the math! Call us at (702) 730-2085.

In the end, for most people the total of initial costs to refinance are made up very quickly in savings each month. We'll work with you to determine what program is best for you, taking into account your cash on hand, the likelihood of selling your house in the near future, and the effect refinancing might have on your taxes. Call us at (702) 730-2085 to get started.

Want to know more about refinancing? Give us a call: (702) 730-2085.