When is Refinancing Worth it?
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Ever hear the old rule of thumb that says you should only consider refinancing if the new interest rate is at least 2 points below your existing one? That may have been true a while back, but with refinancing dropping in cost recently, it's never the wrong time to think about a new mortgage loan! Refinancing has a number of benefits that can make it worth the up-front cost a few times over.
When you refinance, you may have the ability to lower your interest rate and monthly mortgage payment amount, perhaps significantly. You also might have the option of pulling out some of your home equity by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. You may be able to refinance into a shorter-term mortgage loan, giving you the ability to build up your equity quicker.
Of course, you'll have to pay for your the refinance process. With your refinance, you're paying for basically the same things you were charged for during your existing mortgage loan. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
You might investigate paying points to be given a lower interest rate. If you pay (on average) 3% of the mortgage loan amount initially, your savings for the term of the new mortgage loan can be significant. You might have heard that points may be deducted on your income taxes, but because tax regulations are difficult to keep up with, we urge you to speak with your tax professional before making decisions based on this.
Another thing about taxes is that if your interest rate is lowered, it follows that you'll also be reducing the paid interest amount that you'll be able to deduct from your taxes. This is another expense that borrowers take into account. Call us at (443) 619-7900 to help you do the math.
Most borrowers find that the monthly savings outweigh the up-front expenses of a refinance. We can help you explore your options, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at (443) 619-7900 to get you started.
Curious about refinancing your home? Call us: (443) 619-7900.