When is Refinancing Worth it?

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Ever heard the pearl of wisdom that states you should only consider refinancing if your new interest rate will be at least 2 points under your existing one? Perhaps that was sound advice a number of years ago, but as 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, because of the advantages that may come, along with a reduced interest rate.

Advantages of Refinancing

You might be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with your refinanced loan. You could also be able to "cash out" some of your equity, that you may use to take care of higher interest debts, add on to your home, or take a vacation. With lower rates, you might also be able to build up home equity more quickly by moving to a shorter-term mortgage loan.

Fees and Expenses

All these benefits do cost something, though. You'll have the same sort of fees as with your present mortgage loan. Included in the list will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

Paying discount points can get you a better interest rate. The amount you will save on the life of the loan may be significant if you've paid up front about 3% of the new loan balance. You might have heard that points may be deducted on your income taxes, but since tax regulations are difficult to keep up with, we urge you to consult with your tax professional before depending on this.

Speaking of taxes, if your interest rate is lowered, it follows that you will also be reducing the interest amount that you'll be able to deduct from your taxes. This is another expense that some borrowers take into consideration. Call us at (585) 282-0960 to help you do the math.

Ultimately, for most borrowers the amount of initial costs to refinance are paid back very quickly in monthly savings. We will work with you to determine what loan program is right for you, taking into account your cash on hand, the likelihood of selling your house in the next few years, and the effect refinancing may have on your taxes. Call us at (585) 282-0960 to get you started.

Want to know more about refinancing your home? Give us a call at (585) 282-0960.