When is Refinancing Worth it?
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Some have said that only in the case your new interest is at least 2 points lower, should you refinance your mortgage. That could have been valid a while back, but with the fact that refinancing has been costing less recently, it is never the wrong time to think about a new mortgage loan! Refinancing has various benefits that can make it worth the up-front expenditure a few times over.
Advantages of Refinancing
You might be able to lower your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with your refinanced mortgage. Additionally, you could be given the option of pulling out some of the equity in your property by "cashing out" a sum of money to fix up your home, consolidate debt, or take your family on a vacation. You may be able to refinance to a shorter-term mortgage program, giving you the ability to build your equity quicker.
Fees and Expenses
Of course, 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 during your current mortgage loan. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
Paying discount points can help you attain a better interest rate. If you pay (on average) 3% of the loan amount at the start, the savings for the life of the refinanced loan can be substantial. You may have heard that the points can be tax deductible, but because tax regulations are difficult to keep up with, please consult with your tax professional before making decisions based on this.
Another thing about taxes is that once you bring down your interest rate, it follows that you will also be reducing the paid interest amount that you may deduct on your federal income taxes. This is another expense that some borrowers take into account. We can help you do the math! Call us at (773) 774-9040 Ext 121.
Ultimately, for most the amount of initial costs to refinance will be paid back very quickly in savings each month. We will work with you to figure out which loan program is best for you, looking at your cash on hand, the likelihood of selling your residence in the near future, and the effect refinancing may have on your taxes. Call us at (773) 774-9040 Ext 121 to get started.
Want to know more about refinancing your home? Give us a call at (773) 774-9040 Ext 121.