When is Refinancing Worth it?
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Ever hear the old rule of thumb that states you should only refinance if your new interest rate will be at least 2 points lower than your present one? Maybe that was sound advice several years ago, but since refinance costs have been falling recently, it may be time to look into it. Refinancing has various advantages that often make it worth the up-front cost many times over.
Advantages of Refinancing
When you refinance, you may have the ability to lower the interest rate and monthly payment , perhaps significantly. Additionally, you could have the option of tapping into the equity in your house by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. You could be able to refinance to a shorter-term mortgage loan, enabling you to build your equity faster.
Expenses and Fees
As you probably expect, you will have some fees and expenses during the process of refinancing. You'll be charged the same sort of expenses and fees as you did with your present mortgage loan. These might include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
Paying discount points can result in a lower interest rate. When you pay (on average) three percent of the mortgage loan amount initially, the savings for the term of the refinanced mortgage loan can be great. You might be told that these points can be tax deductible, but because tax regulations can be ever-changing, please speak with your tax professional before considering this in your calculations.
Another expense that a borrower may take into account is that a reduced interest rate will lower the interest amount you will deduct from your taxes. We can help you do the math! Call us at (303) 862-7760.
All things considered, for most people the total of up-front costs to refinance will be made up very quickly in monthly savings. We can help you explore what your options are, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at (303) 862-7760 to get started.
Curious about refinancing? Give us a call: (303) 862-7760.