When is Refinancing Worth it?

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Ever heard the pearl of wisdom that says you should only refinance if the new interest rate will be at least two points below your existing rate? That may have been accurate a while back, but since refinancing has been costing less in recent years, it is a good time to think about a new loan! Refinancing has a number of advantages that can make it worth the up-front cost many times over.

Advantages

When you refinance, you might have the ability to reduce the interest rate and monthly mortgage payment , sometimes significantly. You could also have the option to "cash out" some of your equity, which you are able use to take care of higher interest debt, make home improvements, or take a vacation. You could be able to refinance to a shorter-term mortgage loan, giving you the ability to build up your home equity faster.

Fees and Expenses

All these advantages do cost something, though. With your refinance, you are paying for many of the same things you were charged for during your current mortgage. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

Paying discount points can help you attain a better interest rate. The money you'll save over the life of the loan could be substantial if you have paid up front about 3% of the new loan total. You may hear that points may be tax deductible, but because tax regulations are ever-changing, please speak with your tax professional before considering this in your calculations.

Speaking of taxes, once your interest rate is reduced, of course you'll also be reducing the paid interest amount that you will be able to deduct on your taxes. This is another cost that some borrowers take into consideration. We can help you do the math! Call us at 816-272-5550.

Most people find that the monthly savings quickly outweigh the initial cost of a refinance. We'll work with you to determine what mortgage loan program is perfect for you, looking at your cash on hand, how likely you are to sell your residence in the near future, and what effect refinancing may have on your taxes. Call us at 816-272-5550 to get you started.

Want to know more about refinancing? Call us: 816-272-5550.

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