Is Refinancing Worth the Cost?
Curious about refinancing? Give us a call at (412) 241-2001.
Some have said that only when your new interest will be at least two points below your current rate, should you refinance your loan. That might have been accurate a while back, but as refinancing has been costing less recently, it is a good time to think about a new mortgage loan! Refinancing your mortgage has a variety of benefits that can make it worth the initial cost a few times over.
When you refinance, you could have the ability to lower the interest rate and monthly payment , perhaps significantly. You also might be given the option of pulling out some of the equity in your home by “cashing out” a sum of money to renovate your home, consolidate debt, or take your family on a vacation. With lower interest rates, you might also be able to build your home equity more quickly by changing to a shorter term mortgage loan.
Expenses and Fees
All these advantages do come with some expense, though. You will pay the same types of expenses and fees as you did with your present mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender’s title insurance, settlement costs, and other expenses.
You might be obligated to pay a penalty if you refinance your current loan too quickly. That depends on the terms of your present mortgage loan. These penalties may apply only to the first year or two. We will help you figure it out: contact us at (412) 241-2001.
Do the Math
You could need to pay discount points (prepaid interest) to get a lower rate of interest. The amount you’ll save on the life of the mortgage loan could be substantial if you’ve paid up front about 3% of the new loan balance. We recommend that you talk to a tax professional before acting on advice that any paid points may be deducted on your federal income taxes.
Another thing about taxes is that when your interest rate is lowered, naturally you’ll also be lowering the interest amount that you can deduct on your taxes. This is one more cost that borrowers take into account. Call us at (412) 241-2001 to help you do the math.
Most borrowers find that the savings each month outweigh the up-front cost of refinancing. 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 cash on hand. Call us at (412) 241-2001 to get you started.