Is Refinancing Worth the Cost?
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It has been said that only when your new interest is at least two points lower, should you refinance your mortgage. Maybe that was sound advice several years ago, but since refinance costs have been falling recently, it may be time to take a serious look. A refinanced mortgage can be worth its cost many times over, because of the advantages that it brings, as well as a reduced interest rate.
Advantages
When you refinance, you might have the ability to lower your interest rate and monthly payment amount, perhaps significantly. You also might be given the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. You might be able to refinance into a shorter-term mortgage, enabling you to add to your equity faster.
The Cost
As you probably know, you'll have to pay for your process of refinancing. You will pay the same kinds of expenses and fees as you did with your existing home loan. Among these might be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might consider paying points to reduce your interest rate. The amount you will save on the life of the mortgage might be substantial if you have paid up front about 3% of the new loan balance. You may be told that these points can be tax deductible, but as tax regulations can be difficult to keep up with, please consult your tax professional before making decisions based on this.
One more expense that a borrower might take into account is that a reduced rate of interest will reduce the interest amount you'll be able to deduct from your federal income taxes. We can help you do the math! Call us at (585) 282-0960.
Most borrowers find that the savings per month outweigh the up-front cost of a refinance. We will work with you to determine which mortgage loan program is the right fit for you, considering your cash on hand, how likely you are to sell your home in the next few years, and what effect refinancing could have on your taxes. Call us at (585) 282-0960 to get you started.
Want to know more about refinancing? Give us a call: (585) 282-0960.