When is Refinancing Worth it?
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Ever hear the old rule of thumb that states you should only refinance if your new interest rate is at least 2 points lower than your present rate? Maybe several years ago that was wise advice, but since refinance costs have been falling recently, it may be time to look into it. A refinanced mortgage is often worth its cost several times over, because of the advantages that can come, as well as a reduced interest rate.
You might be able to lower your interest rate (sometimes by a lot) and make smaller mortgage payments with your refinanced mortgage. Additionally, you may have the option of tapping into the equity in your property by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also be able to build your home equity faster by moving to a shorter term mortgage loan.
All of these benefits do come with some expense, though. You'll have to pay the same sort of expenses and fees as with your existing home loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You could offer to pay points (prepaid interest) to attain a lower rate of interest. When you pay (on average) three percent of the loan amount at the start, the savings for the term of the refinanced loan can be great. We recommend that you consult with a tax professional before acting on advice that these paid points can be deducted on your taxes.
Another thing about taxes is that if you bring down your interest rate, of course you'll also be reducing the interest amount that you will be able to deduct on your taxes. This is another cost that borrowers take into account. We can help you do the math! Call us at (718) 639-9500.
Ultimately, for most borrowers the amount of initial costs to refinance are paid back soon in savings each month. We'll help you determine which mortgage loan program is perfect for you, considering your cash on hand, how likely you are to sell your residence in the next few years, and the effect refinancing may have on your taxes. Call us at (718) 639-9500 to get you started.
Want to know more about refinancing? Call us at (718) 639-9500.