When To Refinance

Refinance imageHave you ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least two points lower than your present one? That may have been accurate a while back, but with refinancing dropping in cost over the last few years, it’s a good time to think about a new mortgage! Refinancing has some benefits that often make it worth the up-front expenditure many times over.

Benefits
When you refinance, you might have the ability to reduce the interest rate and monthly mortgage payment amount, sometimes significantly. You may also have the ability to “cash out” a portion of the built-up equity in your residence, that you are able use to take care of higher interest debts, add on to your home, or take a vacation. You might be able to refinance to a shorter-term mortgage, enabling you to build your home equity quicker.

The Cost
All these benefits do cost something, though. When you refinance, you’re paying for basically the same things you paid for during your original mortgage loan. Included in your costs will probably be an appraisal, underwriting fees, lender’s title insurance, settlement costs, and other fees.

Doing the Math
Paying discount points can get you a lower interest rate. Your savings on the life of the mortgage could be substantial if you have paid upfront about 3% of the new loan balance. Please consult with a tax professional before acting on rumors that these paid points may be deducted on your taxes.

Speaking of taxes, once you reduce your interest rate, it follows that you will also be reducing the interest amount that you may deduct from your taxes. This is one more cost that borrowers take into account. Call us at (702) 794-4300 to help you do the math.

All things considered, for most the amount of up-front costs to refinance are made up very quickly in savings each month. We can help you explore your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your money on hand. Call us at (702) 794-4300 to get you started.

Want to know more about refinancing? Give us a call at (702) 794-4300.