Is Refinancing Worth the Cost?

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It has been said that only if your new interest is at least two points lower, should you refinance your mortgage. That could have been sound advice years ago, but as refinancing has been costing less over the last few years, it's never the wrong time to consider a new mortgage! A refinanced loan may be worth its cost several times over, because of the benefits that it brings, along with a reduced interest rate.

Benefits

When you refinance, you may have the ability to reduce your interest rate and mortgage payment , perhaps by a lot. Additionally, you might have the option of tapping into the equity in your home by "cashing out" some money to renovate your home, consolidate debt, or take your family on a vacation. With lower rates, you may also get the chance to build your home equity more quickly by switching to a shorter term mortgage loan.

Expenses and Fees

All these benefits do cost something, though. When you refinance, you're paying for basically the same things you were charged for during your current mortgage loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.

Doing the Math

You might need to pay discount points (prepaid interest) to get a more favorable interest rate. The amount you will save over the life of the loan might be substantial if you have paid up front about 3% of the new loan balance. You may hear that points may be deducted on your income taxes, but since tax regulations are difficult to keep up with, please consult with a tax professional before making any decisions based on this.

Another expense that borrowers might consider is that a reduced rate of interest will lower the interest amount you will deduct on your taxes. Call us at 2147187183 to help you do the math.

Most people find that the monthly savings balance out the initial cost of refinancing. We'll help you figure out which mortgage program is best for you, taking into account your cash on hand, the likelihood of selling your house in the near future, and what effect refinancing could have on your taxes. Call us at 2147187183 to get you started.

Want to know more about refinancing your home? Call us at 2147187183.