When is Refinancing Worth it?
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It has been said that only when your new interest will be at least two points lower, should you refinance your loan. That may have been true a while back, but with the fact that refinancing has been costing less recently, it is never the wrong time to think about a new mortgage! A refinance is often worth its cost many times over, because of the advantages that it brings, in addition to a lower interest rate.
When you refinance, you may be able to lower the interest rate and monthly mortgage payment amount, perhaps significantly. Additionally, you might be given the option of tapping into your home equity by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. With reduced interest rates, you might also get the chance to build your home equity more quickly by changing to a shorter-term mortgage loan.
Of course, you will have to pay for the the refinance process. When you refinance, you are paying for a lot of the same things you paid for during your original mortgage. These could include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Do the Math
Paying discount points can get you a lower interest rate. Your savings over the life of the mortgage loan might be significant if you've paid up front about 3% of the new loan balance. You might be told that the points can be deducted on your income taxes, but as tax regulations are difficult to keep up with, please consult a tax professional before depending on this.
One more cost that borrowers might consider is that a reduced rate of interest will lower the interest amount you will deduct from your federal income taxes. We can help you do the math! Call us at 303-220-7500.
All things considered, for most borrowers the amount of initial costs to refinance will be paid back soon in savings each month. We'll help you figure out which mortgage loan program is best for you, taking into account your cash on hand, how likely you are to sell your home in the next few years, and what effect refinancing will have on your taxes. Call us at 303-220-7500 to get started.