When is Refinancing Worth it?
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It has been said that only if your new interest is at least 2 points lower, should you refinance your loan. Perhaps several years ago that was wise advice, but since refinance costs have been falling recently, it may be a good time to take a serious look. A refinanced loan is often worth its cost several times over, considering the advantages that may come, along with a lower interest rate.
Advantages
When you refinance, you may have the ability to lower your interest rate and monthly mortgage payment , perhaps by a lot. You might also be able to "cash out" a portion of the built-up equity in your home, which you will be able use to take care of higher interest debts, improve your home, or plan a vacation. With reduced rates, you may also be able to build up home equity more quickly by switching to a shorter-term mortgage loan.
Fees and Expenses
All these benefits do cost something, though. You will have the same kinds of expenses and fees as with your current mortgage loan. Among these may be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Do the Math
You could offer to pay discount points (prepaid interest) to gain a lower interest rate. Your savings on the life of the mortgage loan may be substantial if you've paid up front about 3% of the new loan balance. You may be told that points may be deducted on your income taxes, but as tax regulations are ever-changing, we urge you to speak with your tax professional before considering this in your calculations.
Speaking of taxes, when you lower your interest rate, it follows that you'll also be lowering the interest amount that you'll be able to deduct from your taxes. This is one more cost that borrowers consider. We can help you do the math! Call us at (808) 935-0678.
Most people find that the savings each month quickly outweigh the up-front cost of a refinance. We can help you find out what your options are, considering the effect a refinance could have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at (808) 935-0678 to get you started.
Curious about refinancing your home? Give us a call: (808) 935-0678.