Is Refinancing Worth the Cost?
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It has been said that only when your new interest will be at least two points under your current rate, should you refinance your mortgage. Perhaps that was sound advice a number of years ago, but as refinance costs have been falling recently, it may be a good time to look into it. Refinancing has some benefits that can make it worth the up-front cost a few times over.
Benefits from Refinancing
When you refinance, you might be able to reduce your interest rate and mortgage payment , sometimes significantly. You also might be given the option of pulling out some of your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. With reduced rates, you may also get the chance to build your home equity more quickly by moving to a shorter-term mortgage.
All these advantages do come with some expense, though. When you refinance, you're paying for basically the same things you were charged for during your existing mortgage. 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 look into paying points to reduce your interest rate. If you pay (on average) three percent of the mortgage loan amount up front, the savings for the term of the refinanced loan can be substantial. You might have heard that points may be tax deductible, but since tax regulations can be ever-changing, please consult your tax professional before making any decisions based on this.
Another thing about taxes is that if your interest rate is reduced, it follows that you will also be reducing the paid interest amount that you can deduct from your taxes. This is another expense that borrowers consider. Call us at (718) 639-9500 to help you do the math.
Ultimately, for most the total of initial costs to refinance are made up soon in monthly savings. We'll help you determine which mortgage program is ideal for you, looking at your cash on hand, the likelihood of selling your home in the next few years, and how refinancing will effect your taxes. Call us at (718) 639-9500 to get started.
Curious about refinancing? Call us: (718) 639-9500.