When is Refinancing Worth it?
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Looking for mortgage advice? We'd be thrilled to discuss your mortgage needs! Call us at (808) 935-0678. Want to get started? Apply Online Now.
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Ever hear the old rule of thumb that says you should only refinance if the new interest rate is at least two points lower than your current one? Perhaps that was sound advice several years ago, but since refinance costs have been getting lower, it could be a good time to look into it. A refinanced mortgage loan is often worth its cost many times over, considering the advantages that it brings, as well as a lower interest rate.
Benefits
When you refinance, you could have the ability to reduce your interest rate and mortgage payment , sometimes significantly. You might also be able to "cash out" some of your equity, which you can use to take care of higher interest debts, improve your home, or take a vacation. With lower interest rates, you might also get the chance to build up home equity more quickly by switching to a shorter term mortgage.
Expenses and Fees
Of course, you will have some fees and expenses during your the refinance process. When you refinance, you're paying for many of the same things you paid for at the time you got your existing mortgage. These can include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might need to pay points (prepaid interest) to attain a more favorable rate of interest. The money you'll save over the life of the mortgage loan might be significant if you have paid up front about 3% of the new loan balance. You might hear that these points may be deducted on your income taxes, but since tax regulations are ever-changing, we urge you to consult with your tax professional before making any decisions based on this.
Speaking of taxes, once your interest rate is lowered, of course you will also be reducing the paid interest amount that you can deduct from your taxes. This is one more expense that borrowers take into account. We can help you do the math! Call us at (808) 935-0678.
All things considered, for most people the amount of up-front costs to refinance are paid back soon in savings each month. We'll work with you to determine what loan program is perfect for you, looking at your cash on hand, the likelihood of selling your house in the near future, and how refinancing will effect your taxes. Call us at (808) 935-0678 to get started.
Curious about refinancing? Call us at (808) 935-0678.