When is Refinancing Worth it?

Curious about refinancing? Call me at 623-202-3142.

Have you ever heard the old rule of thumb that states you should only refinance if your new interest rate is at least 2 points under your current rate? Perhaps several years ago that was wise advice, but as refinance costs have been falling recently, it could be time to look into it. Refinancing your mortgage loan has some advantages that often make it worth the initial cost a few times over.

Advantages

You might be able to lower your interest rate (sometimes significantly) and reduce your mortgage payment amount with a refinanced mortgage loan. You also might be given the option of tapping into your home equity by "cashing out" some funds to fix up your home, consolidate debt, or take your family on a vacation. With reduced rates, you might also be able to build your home equity faster by changing to a shorter-term mortgage.

Fees and Expenses

All these benefits do come with some expense, though. When you refinance, you're paying for most of the same things you were charged for when you got your existing mortgage loan. These can include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

You might have to make a penalty payment for refinancing your existing mortgage too soon. That depends on the terms of your present mortgage loan. There are penalties that apply only for the first couple of years. I will help you with the details: contact me at 623-202-3142.

Do the Math

Paying points can help you get a lower interest rate. If you pay (on average) three percent of the mortgage loan amount up front, the savings for the life of the new mortgage loan can be significant. I recommend that you consult a tax professional before acting on advice that the paid points may be deducted on your taxes.

Speaking of taxes, when you reduce your interest rate, of course you'll also be lowering the interest amount that you may deduct from your taxes. This is one more expense that some borrowers take into consideration. I can help you do the math! Call us at 623-202-3142.

All things considered, for most people the amount of initial costs to refinance will be paid back soon in savings each month. I will work with you to determine what mortgage program is the ideal fit for you, looking at your cash on hand, how likely you are to sell your home in the near future, and what effect refinancing might have on your taxes. Call me at 623-202-3142 to get started.

Looking for mortgage advice? I will be glad to help! Call me at 623-202-3142. Ready to begin? Apply Now.

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