When is Refinancing Worth it?


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Some have said that only in the case your new interest is at least two points below your current rate, should you refinance your loan. Perhaps that was good advice several years ago, but as refinance costs have been getting lower, it may be a good time to take a serious look. Refinancing your mortgage loan has some advantages that can make it worth the up-front cost several times over.

Benefits

When you refinance, you may be able to reduce the interest rate and mortgage payment amount, perhaps by a lot. You also could have the option of pulling out some of the equity in your property by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. With reduced rates, you might also get the chance to build up home equity faster by switching to a shorter term mortgage.

Expenses and Fees

As you probably know, you will have some fees and expenses during your process of refinancing. You'll be charged the same sort of fees as you did with your current mortgage. These probably include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.

Do the Math

Paying discount points can get you a better interest rate. The amount you'll save over the life of the loan could be substantial if you've paid up front about 3% of the new loan total. You might hear that the points may be deducted on your income taxes, but because tax regulations are difficult to keep up with, please speak with your tax professional before making any decisions based on this.

One more expense that borrowers might take into account is that a reduced interest rate 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 360-539-4687.

Most people find that the savings per month quickly balance out the up-front expenses of a refinance. We'll help you figure out what mortgage program is best for you, looking at your cash on hand, the likelihood of selling your house in the next few years, and what effect refinancing might have on your taxes. Call us at 360-539-4687 to get started.

Curious about refinancing? Give us a call: 360-539-4687.

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