When is Refinancing Worth it?
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It has been said that only if your new interest will be at least 2 points lower, should you refinance your loan. Perhaps several years ago that was good advice, but since refinance costs have been falling recently, it could be a good time to take a serious look. A refinanced loan is often worth its cost many times over, considering the benefits that it brings, as well as a lower interest rate.
You may be able to bring down your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with your refinanced mortgage. You could also have the ability to "cash out" some of your home equity, that you are able use to take care of higher interest debt, make home improvements, or plan a vacation. With reduced rates, you might also get the chance to build your home equity more quickly by changing to a shorter-term mortgage.
All these benefits do come with some expense, though. With your refinance, you're paying for many of the same things you were charged for during your existing mortgage loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
Paying points can result in a lower interest rate. Your savings on the life of the loan might be substantial if you have paid up front about 3% of the new loan balance. You might hear that these points can be tax deductible, but because tax regulations can be difficult to keep up with, we urge you to consult a tax professional before making any decisions based on this.
Speaking of taxes, when your interest rate is lowered, naturally you will also be reducing the paid interest amount that you will be able to deduct on your federal income taxes. This is one more expense that borrowers take into account. We can help you do the math! Call us at (610) 889-7467.
Most people find that the savings per month quickly outweigh the up-front expenses of a refinance. We will work with you to find out which mortgage loan program is ideal for you, considering your cash on hand, the likelihood of selling your residence in the next few years, and how refinancing might effect your taxes. Call us at (610) 889-7467 to get started.
Want to know more about refinancing your home? Call us at (610) 889-7467.