Is Refinancing Worth the Cost?
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It has been said that only in the case your new interest will be at least two points below your current rate, should you refinance your mortgage. That could have been true a while back, but with refinancing dropping in cost over the last few years, it's never the wrong time to explore the options of a new mortgage! Refinancing has a variety of benefits that often make it worth the up-front cost a few times over.
You might be able to bring down your interest rate (sometimes substantially) and reduce your mortgage payment amount with a refinanced loan. Additionally, you might be given the option of tapping into the equity in your house by "cashing out" some money to fix up your home, consolidate debt, or take your family on a vacation. You may be able to refinance into a shorter-term mortgage program, giving you the ability to build your home equity quicker.
All of these advantages do cost something, though. You'll be charged the same sort of fees as with your present mortgage 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 need to pay points (prepaid interest) to attain a lower interest rate. If you pay (on average) three percent of the loan amount up front, your savings for the term of the new mortgage can be substantial. Please consult a tax professional before acting on hear-say that the paid points may be deducted on your taxes.
An additional expense that borrowers might consider is that a reduced interest rate will reduce the interest amount you will be able to deduct on your federal income taxes. Call us at 701.222.0100 to help you do the math.
Most borrowers find that the savings each month balance out the initial expenses of refinancing. We can help you explore your options, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the near future, and your money on hand. Call us at 701.222.0100 to get you started.
Curious about refinancing? Give us a call: 701.222.0100.