When is Refinancing Worth it?
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It has been said that only when your new interest will be at least 2 points below your current rate, should you refinance your loan. That could have been sound advice a while back, but with refinancing dropping in cost in recent years, it's never the wrong time to think about a new mortgage loan! A refinance may be worth its cost many times over, considering the benefits that it brings, along with a reduced interest rate.
You might be able to lower your interest rate (sometimes by a lot) and make smaller monthly payments with your refinanced loan. You also might have the option of pulling out some of the equity in your property by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. You may have the option to refinance into a shorter-term mortgage loan, giving you the ability to build up your equity faster.
All these benefits do cost something, though. When you refinance, you're paying for many of the same things you were charged for at the time you obtained your existing mortgage loan. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
You might offer to pay points (prepaid interest) to gain a more favorable rate of interest. Your savings over the life of the loan could be significant if you've paid up front about three percent of the new loan balance. We recommend that you consult with a tax professional before acting on hear-say that the paid points can be deducted on your taxes.
An additional cost that borrowers may consider is that a reduced rate of interest will lower the interest amount you'll deduct from your federal income taxes. Call us at 214-718-7183 to help you do the math.
In the end, for most borrowers the total of up-front costs to refinance are paid back very quickly in monthly savings. We can help you figure out your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at 214-718-7183 to get you started.
Curious about refinancing? Call us: 214-718-7183.