When is Refinancing Worth it?
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Have you ever heard the old rule of thumb that says you should only refinance if the new interest rate will be at least 2 points below your current one? Maybe that was good advice a number of years ago, but since refinance costs have been falling recently, it could be time to take a serious look. Refinancing your mortgage has a number of benefits that will often make it worth the initial expenditure many times over.
Benefits from Refinancing
You may be able to bring down your interest rate (sometimes significantly) and have smaller mortgage payments with your refinanced mortgage loan. Additionally, you might be given the option of tapping into the equity in your house by "cashing out" some funds to renovate your home, consolidate debt, or plan a special vacation. You might be able to refinance into a shorter-term mortgage loan, enabling you to build up your equity quicker.
Fees and Expenses
As you probably expect, you'll have some fees and expenses during your process of refinancing. With your refinance, you are paying for many of the same things you paid for when you got your original mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might look into paying points to be given a lower interest rate. When you pay (on average) three percent of the mortgage loan amount up front, the savings for the life of the refinanced mortgage loan can be significant. We recommend that you consult a tax professional before acting on advice that these paid points may be deducted on your federal income taxes.
Another expense that borrowers may take into account is that a lower rate of interest will reduce the interest amount you'll be able to deduct from your taxes. Call us at (808) 935-0678 to help you do the math.
Ultimately, for most people the amount of up-front costs to refinance are made up soon in savings each month. We can help you explore what your options are, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the near future, and your money on hand. Call us at (808) 935-0678 to get you started.
Want to know more about refinancing your home? Call us: (808) 935-0678.