Is Refinancing Worth the Cost?
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Some have said that only if your new interest will be at least 2 points lower, should you refinance your mortgage. Perhaps that was good advice several years ago, but since refinance costs have been falling recently, it may be time to look into it. Refinancing has some advantages that will often make it worth the up-front cost several times over.
Advantages of Refinancing
When you refinance, you might have the ability to reduce your interest rate and monthly payment amount, sometimes by a lot. You might also have the option to "cash out" a portion of the built-up equity in your home, that you are able use to take care of higher interest debt, improve your home, or plan a vacation. With lower rates, you may also get the chance to build up home equity faster by moving to a shorter term loan.
Expenses and Fees
All of these advantages do cost something, though. You will pay the same sort of expenses and fees as you did with your present home loan. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
Paying discount points can get you a better interest rate. If you pay (on average) 3% of the loan amount up front, your savings for the term of the new loan can be great. You may be told that these points can be tax deductible, but since tax regulations can be difficult to keep up with, we urge you to consult with your tax professional before considering this in your calculations.
An additional expense that borrowers may take into account is that a lower rate of interest will lower the interest amount you will deduct on your federal income taxes. We can help you do the math! Call us at (718) 639-9500.
Ultimately, for most borrowers the amount of up-front costs to refinance will be paid back soon in monthly savings. We can help you explore your options, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the near future, and your money on hand. Call us at (718) 639-9500 to get started.
Want to know more about refinancing? Call us: (718) 639-9500.