When is Refinancing Worth it?
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Some have said that only if your new interest is at least 2 points under your current rate, should you refinance your loan. That could have been valid years ago, but as refinancing has been costing less recently, it's a good time to consider a new mortgage! Refinancing your mortgage loan has a number of advantages that will often make it worth the initial expenditure a few times over.
When you refinance, you might be able to reduce the interest rate and mortgage payment amount, perhaps considerably. You could also be able to "cash out" a portion of your equity, which you will be able use to consolidate debts, improve your home, or take a vacation. With reduced interest rates, you might also be able to build your home equity faster by moving to a shorter term loan.
Of course, you will have some fees and expenses during the process of refinancing. You'll have to pay the same kinds of fees as with your current mortgage. These can include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Doing the Math
You could offer to pay discount points (prepaid interest) to gain a more favorable rate of interest. If you pay (on average) 3% of the loan amount at the start, your savings for the life of the new loan can be significant. You may hear that points may be tax deductible, but because tax regulations can be ever-changing, please consult with a tax professional before making decisions based on this.
Another thing about taxes is that once you lower your interest rate, it follows that you will also be lowering the paid interest amount that you can deduct from your taxes. This is one more cost that borrowers take into consideration. We can help you do the math! Call us at 801.255.6582.
Most borrowers find that the savings each month outweigh the up-front expenses of refinancing. We will work with you to determine what program is right for you, considering your cash on hand, how likely you are to sell your residence in the next few years, and how refinancing might effect your taxes. Call us at 801.255.6582 to get started.
Curious about refinancing? Call us at 801.255.6582.