Is Refinancing Worth the Cost?
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Looking for a loan? We can help! Call us at 978-422-2311. Ready to get started? Apply Here.
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Have you ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate will be at least two points lower than your current one? That could have been good advice a while back, but with refinancing dropping in cost in recent years, it's a good time to explore the options of a new mortgage! Refinancing has some advantages that can make it worth the initial cost several times over.
Advantages
You could be able to lower your interest rate (sometimes substantially) and make smaller mortgage payments with a refinanced mortgage loan. Additionally, you might be given the option of tapping into the equity in your house by "cashing out" a sum of money to remodel your home, consolidate debt, or plan a special vacation. You could be able to refinance to a shorter-term mortgage, enabling you to add to your home equity faster.
Fees and Expenses
All these advantages do cost something, though. You'll be charged the same sort of fees as you did with your current mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You could offer to pay discount points (prepaid interest) to get a more favorable interest rate. Your savings on the life of the loan could be substantial if you have paid up front about three percent of the new loan total. Please talk to a tax professional before acting on hear-say that these paid points may be deducted on your taxes.
Another cost that borrowers might take into account is that a lower rate of interest will reduce the interest amount you'll deduct on your federal income taxes. Call us at 978-422-2311 to help you do the math.
Most borrowers find that the monthly savings quickly balance out the initial expenses of a refinance. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the next couple of years, and your available cash. Call us at 978-422-2311 to get started.
Want to know more about refinancing? Give us a call: 978-422-2311.
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