When is Refinancing Worth it?
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It has been said that only in the case your new interest will be at least two points below your current rate, should you refinance your loan. That might have been accurate years ago, but with the fact that refinancing has been costing less in recent years, it is a good time to explore the options of a new mortgage loan! Refinancing your mortgage has a variety of benefits that can make it worth the initial cost several times over.
When you refinance, you could have the ability to reduce the interest rate and monthly mortgage payment , perhaps significantly. You could also have the ability to "cash out" a portion of your equity, which you may use to consolidate debt, add on to your home, or finance a vacation. You may have the option to refinance into a shorter-term mortgage, giving you the ability to add to your home equity quicker.
All these benefits do come with some expense, though. When you refinance, you are paying for many of the same things you were charged for during your current mortgage loan. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might investigate paying points to receive a reduced interest rate. The amount you will save over the life of the mortgage could be substantial if you have paid up front about three percent of the new loan total. You may have heard that the points can be deducted on your income taxes, but as tax regulations are difficult to keep up with, we urge you to consult with your tax professional before considering this in your calculations.
Speaking of taxes, when you bring down your interest rate, of course you will also be lowering the interest amount that you'll be able to deduct from your federal income taxes. This is one more cost that some borrowers take into consideration. Call us at (718) 639-9500 to help you do the math.
Most people find that the monthly savings quickly outweigh the up-front expenses of refinancing. We'll work with you to determine what mortgage loan program is ideal for you, considering your cash on hand, the likelihood of selling your home in the next few years, and how refinancing might effect your taxes. Call us at (718) 639-9500 to get you started.
Want to know more about refinancing? Call us at (718) 639-9500.