Is Refinancing Worth the Cost?
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Ever hear the pearl of wisdom that states you should only refinance if the new interest rate will be at least two points below your current rate? Perhaps several years ago that was good advice, but since refinance costs have been getting lower, it may be time to look into it. A refinanced mortgage can be worth its cost many times over, because of the benefits that it brings, in addition to a lower interest rate.
Benefits
When you refinance, you may have the ability to lower the interest rate and monthly mortgage payment , sometimes by a lot. You could also have the ability to "cash out" a portion of the built-up equity in your home, that you may use to consolidate debt, add on to your home, or take a vacation. With lower interest rates, you might also be able to build up home equity faster by switching to a shorter term loan.
Fees and Expenses
All these benefits do come with some expense, though. With your refinance, you are paying for basically the same things you paid for when you got your existing mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
You could need to pay discount points (prepaid interest) to get a better rate of interest. Your savings over the life of the loan may be significant if you've paid up front about 3% of the new loan total. Please consult with a tax professional before acting on hear-say that the points paid can be deducted on your federal income taxes.
Speaking of taxes, when you bring down your interest rate, of course you will also be reducing the paid interest amount that you may deduct from your taxes. This is another expense that borrowers consider. Call us at 6507631924 to help you do the math.
Most borrowers find that the monthly savings outweigh the initial cost of refinancing. We can help you figure out your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at 6507631924 to get started.
Curious about refinancing your home? Give us a call at 6507631924.