Is Refinancing Worth the Cost?
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Have you ever heard the old rule of thumb that states you should only refinance if your new interest rate is at least two points under your existing one? Perhaps several years ago that was wise advice, but as refinance costs have been getting lower, it could be time to take a serious look. A refinanced mortgage loan can be worth its cost several times over, considering the benefits that may come, in addition to a lower interest rate.
Benefits from Refinancing
You may be able to bring down your interest rate (sometimes by a lot) and have smaller mortgage payments with a refinanced mortgage loan. You could also have the ability to "cash out" some of the built-up equity in your residence, that you will be able use to consolidate debts, make home improvements, or plan a vacation. With lower interest rates, you might also get the chance to build up home equity more quickly by moving to a shorter-term mortgage loan.
Fees and Expenses
As you probably expect, you will have some fees and expenses during your process of refinancing. With your refinance, you are paying for a lot of the same things you paid for during your original mortgage loan. Among these can be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
You could offer to pay discount points (prepaid interest) to get a lower rate of interest. The money you'll save over the life of the mortgage loan might be significant if you have paid up front about three percent of the new loan balance. You might have heard that these points can be tax deductible, but since tax regulations can be ever-changing, we urge you to consult with a tax professional before depending on this.
Another thing about taxes is that once you bring down your interest rate, it follows that you'll also be lowering the paid interest amount that you'll be able to deduct from your taxes. This is one more cost that borrowers take into consideration. We can help you do the math! Call us at (575)437-4880.
In the end, for most the amount of initial costs to refinance will be paid back soon in monthly savings. We'll help you determine what mortgage loan program is right for you, considering your cash on hand, how likely you are to sell your residence in the near future, and how refinancing may effect your taxes. Call us at (575)437-4880 to get you started.
Want to know more about refinancing your home? Call us: (575)437-4880.
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