When is Refinancing Worth it?
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Some have said that only in the case your new interest will be at least two points under your current rate, should you refinance your mortgage. That may have been valid years ago, but with refinancing dropping in cost in recent years, it is never the wrong time to think about a new loan! Refinancing has a variety of advantages that can make it worth the initial cost a few times over.
You might be able to bring down your interest rate (sometimes by a lot) and reduce your mortgage payment amount with your refinanced mortgage loan. You could also be able to "cash out" a portion of the built-up equity in your residence, which you are able use to consolidate debts, add on to your home, or finance a vacation. With lower rates, you might also be able to build your home equity faster by moving to a shorter-term mortgage.
All of these advantages do cost something, though. You will pay the same types of expenses and fees as with your present home loan. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
Paying discount points can help you attain a lower interest rate. The amount you will save over the life of the loan could be significant if you've paid up front about 3% of the new loan balance. You may have heard that the points may be tax deductible, but since tax regulations are difficult to keep up with, we urge you to speak with a tax professional before making decisions based on this.
Speaking of taxes, when you reduce your interest rate, naturally you'll also be lowering the interest amount that you'll be able to deduct on your taxes. This is another cost that some borrowers take into consideration. We can help you do the math! Call us at (443) 619-7900.
All things considered, for most borrowers the amount of up-front costs to refinance will be made up very quickly in monthly savings. We'll work with you to determine what mortgage 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 could have on your taxes. Call us at (443) 619-7900 to get you started.
Curious about refinancing? Call us: (443) 619-7900.