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When is Refinancing Worth it?

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Ever heard the pearl of wisdom that states you should only refinance if your new interest rate is at least 2 points below your current one? Maybe that was sound advice a number of years ago, but as refinance costs have been getting lower, it may be time to look into it. Refinancing your loan has a number of advantages that will often make it worth the initial cost several times over.

Advantages

You might be able to lower your interest rate (sometimes by a lot) and have smaller monthly payments with your refinanced mortgage. You also might be given the option of pulling out some of your home equity by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also get the chance to build up home equity more quickly by switching to a shorter-term mortgage loan.

The Cost

All these advantages do come with some expense, though. With your refinance, you are paying for basically the same things you were charged for at the time you got your existing mortgage. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Do the Math

You might look into paying points to reduce your interest rate. The money you will save on the life of the loan may be substantial if you've paid up front about three percent of the new loan total. Please consult with a tax professional before acting on hear-say that these points paid can be deducted on your federal income taxes.

An additional expense that a borrower might take into account is that a reduced interest rate will reduce the interest amount you will be able to deduct on your taxes. We can help you do the math! Call us at 516-431-2009.

Most borrowers find that the monthly savings quickly outweigh the up-front expenses of a refinance. We can help you explore your options, considering the effect a refinance could have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 516-431-2009 to get started.

Want to know more about refinancing your home? Give us a call: 516-431-2009.

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