Is Refinancing Worth the Cost?
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Ever hear the pearl of wisdom that states you should only refinance if your new interest rate will be at least 2 points under your existing rate? That could have been sound advice a while back, but as refinancing has been costing less recently, it is never the wrong time to consider a new mortgage! A refinance is often worth its cost several times over, factoring in the advantages that it brings, as well as a reduced interest rate.
When you refinance, you might be able to reduce the interest rate and mortgage payment amount, perhaps considerably. You also might have the option of tapping into your home equity by "cashing out" some funds to renovate your home, consolidate debt, or plan a special vacation. With lower rates, you may also be able to build your home equity more quickly by moving to a shorter term mortgage loan.
Fees and Expenses
All of these advantages do come with some expense, though. You will be charged the same sort of fees as with your current home loan. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying discount points can help you get a lower interest rate. If you pay (on average) three percent of the mortgage loan amount initially, your savings for the life of the refinanced mortgage loan can be significant. You may be told that these points can be tax deductible, but since tax regulations are difficult to keep up with, please consult your tax professional before making any decisions based on this.
One more expense that borrowers may take into account is that a lower rate of interest will reduce the interest amount you'll be able to deduct on your taxes. We can help you do the math! Call us at (718) 639-9500.
In the end, for most people the total of up-front costs to refinance are made up very quickly in monthly savings. We will work with you to determine what mortgage loan program is right for you, taking into account your cash on hand, the likelihood of selling your house in the near future, and the effect refinancing could have on your taxes. Call us at (718) 639-9500 to get you started.
Curious about refinancing? Call us: (718) 639-9500.