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 below your current rate, should you refinance your loan. That could have been true years ago, but as refinancing has been costing less recently, it is a good time to explore the options of a new mortgage loan! A refinance may be worth its cost many times over, factoring in the advantages that may come, as well as a reduced interest rate.
You might be able to lower your interest rate (sometimes substantially) and reduce your monthly payment amount with a refinanced loan. You might also have the ability to "cash out" a portion of your home equity, that you can use to consolidate debts, add on to your home, or take a vacation. With lower rates, you may also get the chance to build up home equity faster by switching to a shorter term mortgage loan.
As you probably expect, you will have some fees and expenses during your process of refinancing. When you refinance, you're paying for most of the same things you were charged for during your current mortgage loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might look into paying points to reduce your interest rate. The amount you'll save on the life of the loan might be substantial if you have paid up front about three percent of the new loan total. You might be told that these points may be tax deductible, but because tax regulations are difficult to keep up with, please speak with a tax professional before making any decisions based on this.
An additional cost that borrowers might take into account is that a lower rate of interest will reduce the interest amount you'll be able to deduct from your federal income taxes. Call us at (808) 935-0678 to help you do the math.
Ultimately, for most people the total of up-front costs to refinance will be made up soon in savings each month. We will work with you to determine which mortgage program is right for you, taking into account your cash on hand, how likely you are to sell your house in the next few years, and how refinancing can effect your taxes. Call us at (808) 935-0678 to get you started.
Want to know more about refinancing? Give us a call at (808) 935-0678.