Is Refinancing Worth the Cost?
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It has been said that only when your new interest is at least 2 points lower, should you refinance your mortgage. Perhaps several years ago that was sage advice, but since refinance costs have been getting lower, it may be time to take a serious look. A refinance may be worth its cost several times over, considering the advantages that come, as well as a reduced interest rate.
Advantages
You might be able to bring down your interest rate (sometimes by a lot) and have smaller monthly payments with a refinanced mortgage. You could also be able to "cash out" a portion of your equity, that you are able use to take care of higher interest debts, add on to your home, or plan a vacation. You could have the option to refinance into a shorter-term mortgage program, giving you the ability to add to your equity quicker.
Expenses and Fees
All these benefits do come with some expense, though. You'll be charged the same types of expenses and fees as with your present mortgage loan. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might think about paying points to reduce your interest rate. When you pay (on average) 3% of the mortgage loan amount up front, the savings for the term of the refinanced mortgage loan can be significant. You may hear that these points may be tax deductible, but as tax regulations are ever-changing, we urge you to consult your tax professional before considering this in your calculations.
Another expense that a borrower may take into account is that a lower interest rate will lower the interest amount you will deduct from your federal income taxes. We can help you do the math! Call us at (208) 788-8800.
Ultimately, for most people the total of up-front costs to refinance are paid back very quickly in savings each month. We can help you explore what your options are, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at (208) 788-8800 to get you started.
Curious about refinancing your home? Give us a call at (208) 788-8800.