When is Refinancing Worth it?

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It has been said that only when your new interest will be at least 2 points below your current rate, should you refinance your loan. That could have been true years ago, but since refinancing has been costing less recently, it's never the wrong time to explore the options of a new mortgage loan! A refinance can be worth its cost several times over, factoring in the benefits that come, in addition to a lower interest rate.

Benefits from Refinancing

When you refinance, you could be able to lower the interest rate and monthly mortgage payment , perhaps by a lot. Additionally, you could be given the option of tapping into 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 might also be able to build up home equity faster by changing to a shorter-term mortgage loan.

The Cost

As you probably expect, you will have to pay for your process of refinancing. You'll have to pay the same kinds of expenses and fees as with your current mortgage loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Doing the Math

Paying discount points can help you attain a better interest rate. Your savings over the life of the mortgage might be significant if you've paid up front about three percent of the new loan balance. You may have heard that these points can be deducted on your income taxes, but because tax regulations can be difficult to keep up with, please speak with your tax professional before making any decisions based on this.

An additional cost that borrowers may take into account is that a reduced rate of interest will reduce the interest amount you'll be able to deduct from your taxes. Call us at (401) 583-4150 to help you do the math.

All things considered, for most the amount of initial costs to refinance will be paid back soon in savings each month. We can help you find out your options, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at (401) 583-4150 to get started.

Want to know more about refinancing? Call us at (401) 583-4150.

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