Is Refinancing Worth the Cost?
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In the market for a mortgage loan? We will be glad to help! Give us a call at (281) 778-0805. Ready to get started? Apply Here.
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Have you ever heard the old rule of thumb that says you should only consider refinancing if your new interest rate will be at least 2 points under your current rate? Maybe several years ago that was wise advice, but as refinance costs have been falling recently, it may be a good time to look into it. Refinancing your loan has a number of advantages that often make it worth the initial cost many times over.
Advantages
You might be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with your refinanced loan. You could also have the option to "cash out" some of your equity, which you will be able use to consolidate debts, improve your home, or finance a vacation. With lower rates, you might also get the chance to build your home equity faster by moving to a shorter-term mortgage.
The Cost
Of course, you will have to pay for your the refinance process. With your refinance, you are paying for many of the same things you were charged for when you got your existing mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You could offer to pay points (prepaid interest) to attain a more favorable interest rate. When you pay (on average) three percent of the loan amount initially, your savings for the term of the refinanced mortgage can be significant. We recommend that you consult a tax professional before acting on hear-say that these paid points may be deducted on your taxes.
An additional cost that borrowers might take into account is that a lower interest rate will reduce the interest amount you'll deduct on your federal income taxes. Call us at (281) 778-0805 to help you do the math.
In the end, for most people the amount of initial costs to refinance are made up very quickly in monthly savings. We'll help you determine which mortgage loan program is right for you, considering your cash on hand, the likelihood of selling your residence in the near future, and what effect refinancing could have on your taxes. Call us at (281) 778-0805 to get you started.
Want to know more about refinancing your home? Give us a call: (281) 778-0805.