Is Refinancing Worth the Cost?
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It has been said that only when your new interest will be at least two points lower, should you refinance your loan. That might have been valid a while back, but with refinancing dropping in cost over the last few years, it is a good time to think about a new mortgage! A refinanced mortgage may be worth its cost several times over, because of the benefits that can come, as well as a lower interest rate.
When you refinance, you could have the ability to lower your interest rate and monthly mortgage payment amount, sometimes considerably. You also could have the option of pulling out some of your home equity by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. With lower rates, you may also be able to build your home equity more quickly by moving to a shorter-term mortgage loan.
All these benefits do cost something, though. With your refinance, you're paying for basically the same things you were charged for at the time you obtained your existing mortgage. These can include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Do the Math
You might look into paying points to reduce your interest rate. When you pay (on average) three percent of the mortgage loan amount at the start, the savings for the term of the new mortgage can be significant. You may be told that points can be deducted on your income taxes, but because tax regulations are difficult to keep up with, please consult a tax professional before making any decisions based on this.
Another cost that a borrower may take into account is that a lower interest rate will lower the interest amount you'll be able to deduct on your federal income taxes. Call us at (808) 935-0678 to help you do the math.
Ultimately, for most people the amount of initial costs to refinance will be made up soon in savings each month. We can help you find out your options, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your cash on hand. Call us at (808) 935-0678 to get started.
Want to know more about refinancing? Call us: (808) 935-0678.