When is Refinancing Worth it?

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Have you ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate is at least two points below your current one? That might have been valid a while back, but with refinancing dropping in cost over the last few years, it is a good time to explore the options of a new mortgage! A refinance is often worth its cost several times over, factoring in the benefits that come, as well as a lower interest rate.

Benefits

You might be able to bring down your interest rate (sometimes significantly) and reduce your monthly payment amount with a refinanced loan. You may also have the ability to "cash out" a portion of your home equity, that you can use to take care of higher interest debt, add on to your home, or take a vacation. You might be able to refinance into a shorter-term mortgage, enabling you to build up your equity quicker.

Fees and Expenses

All these benefits do come with some expense, though. You will be charged the same types of expenses and fees as you did with your existing mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Doing the Math

You might think about paying points to reduce your interest rate. The money you will save on the life of the loan could be significant if you have paid up front about three percent of the new loan total. Please talk to a tax professional before acting on rumors that these paid points can be deducted on your taxes.

Speaking of taxes, if you reduce your interest rate, of course you'll also be lowering the interest amount that you'll be able to deduct from your federal income taxes. This is another expense that borrowers consider. We can help you do the math! Call us at 703.255-5810.

In the end, for most the amount of initial costs to refinance will be made up very quickly in monthly savings. We'll help you figure out what mortgage program is best for you, looking at your cash on hand, how likely you are to sell your home in the near future, and how refinancing could effect your taxes. Call us at 703.255-5810 to get started.

Want to know more about refinancing? Give us a call: 703.255-5810.

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