When is Refinancing Worth it?
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Have you ever heard the pearl of wisdom that states you should only refinance if the new interest rate is at least 2 points below your existing rate? Perhaps that was sound advice a number of years ago, but as refinance costs have been getting lower, it may be a good time to look into it. Refinancing has a variety of benefits that often make it worth the initial cost a few times over.
You could be able to bring down your interest rate (sometimes by a lot) and reduce your monthly payment amount with your refinanced mortgage loan. You may also be able to "cash out" some of the built-up equity in your residence, that you are able use to take care of higher interest debts, make home improvements, or take a vacation. You could be able to refinance to a shorter-term mortgage program, giving you the ability to build your home equity faster.
Fees and Expenses
As you probably expect, you will have some fees and expenses during your the refinance process. When you refinance, you're paying for many of the same things you were charged for when you got your current mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might offer to pay discount points (prepaid interest) to get a better interest rate. If you pay (on average) three percent of the mortgage loan amount at the start, your savings for the term of the new mortgage can be great. You might hear that these points can be deducted on your income taxes, but as tax regulations can be difficult to keep up with, please consult a tax professional before making any decisions based on this.
Speaking of taxes, if your interest rate is reduced, of course you'll also be reducing the interest amount that you may deduct on your taxes. This is another cost that borrowers take into account. We can help you do the math! Call us at (303) 862-7760.
Ultimately, for most people the total of initial costs to refinance are paid back very quickly in monthly savings. We'll help you determine which loan program is right for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing might have on your taxes. Call us at (303) 862-7760 to get started.
Curious about refinancing your home? Call us at (303) 862-7760.