Is Refinancing Worth the Cost?
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Some have said that only if your new interest is at least 2 points lower, should you refinance your loan. That could have been accurate a while back, but as refinancing has been costing less in recent years, it's a good time to consider a new loan! Refinancing has various benefits that often make it worth the initial expenditure several times over.
Benefits from Refinancing
When you refinance, you could be able to lower the interest rate and mortgage payment , sometimes considerably. You could also be able to "cash out" some of the built-up equity in your residence, which you will be able use to take care of higher interest 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.
Expenses and Fees
Of course, you will have some fees and expenses during the the refinance process. When you refinance, you are paying for basically the same things you were charged for during your current mortgage. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might look into paying points to get a lower interest rate. The amount you will save over the life of the loan could be substantial if you've paid up front about 3% of the new loan total. You may have heard that points may be deducted on your income taxes, but as tax regulations can be ever-changing, please speak with a tax professional before considering this in your calculations.
Another cost that borrowers might take into account is that a reduced interest rate will reduce the interest amount you will deduct on your taxes. Call us at 701.222.0100 to help you do the math.
All things considered, for most borrowers the amount of up-front costs to refinance are made up very quickly in savings each month. We'll help you determine which mortgage program is right for you, taking into account your cash on hand, the likelihood of selling your house in the next few years, and the effect refinancing may have on your taxes. Call us at 701.222.0100 to get started.
Want to know more about refinancing? Call us: 701.222.0100.