When is Refinancing Worth it?

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Some have said that only if your new interest will be at least 2 points below your current rate, should you refinance your loan. That could have been valid years ago, but as refinancing has been costing less recently, it's never the wrong time to consider a new mortgage loan! A refinanced loan is often worth its cost many times over, because of the advantages that come, as well as a lower interest rate.

Advantages

You may be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with a refinanced mortgage loan. You might also have the ability to "cash out" a portion of the built-up equity in your home, that you are able use to take care of higher interest debts, add on to your home, or finance a vacation. With lower rates, you might also be able to build your home equity faster by switching to a shorter-term mortgage.

The Cost

All these advantages do come with some expense, though. When you refinance, you are paying for most of the same things you paid for when you obtained your original mortgage. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Doing the Math

You might offer to pay discount points (prepaid interest) to get a better rate of interest. If you pay (on average) 3% of the loan amount up front, your savings for the term of the refinanced mortgage loan can be significant. Please consult with a tax professional before acting on advice that these paid points may be deducted on your federal income taxes.

Speaking of taxes, when you reduce your interest rate, naturally you'll also be lowering the interest amount that you'll be able to deduct on your federal income taxes. This is another expense that some borrowers take into account. Call us at (585) 282-0960 to help you do the math.

Most people find that the savings per month outweigh the initial cost of a refinance. 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 near future, and your available cash. Call us at (585) 282-0960 to get started.

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