Is Refinancing Worth the Cost?
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Ever hear the pearl of wisdom that says you should only refinance if the new interest rate is at least 2 points below your current one? Maybe that was good advice several years ago, but as refinance costs have been falling recently, it could be a good time to look into it. A refinanced mortgage loan may be worth its cost several times over, considering the advantages that it brings, as well as a lower interest rate.
Benefits
You may be able to bring down your interest rate (sometimes significantly) and have smaller monthly payments with your refinanced loan. You could also have the ability to "cash out" some of the built-up equity in your residence, which you can use to consolidate debts, make home improvements, or take a vacation. You may be able to refinance into a shorter-term mortgage program, giving you the ability to add to your home equity faster.
The Cost
Of course, you will have to pay for your process of refinancing. When you refinance, you're paying for basically the same things you paid for when you got your current mortgage loan. These probably include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Doing the Math
You could need to pay discount points (prepaid interest) to gain a more favorable interest rate. If you pay (on average) 3% of the mortgage loan amount at the start, your savings for the term of the refinanced mortgage loan can be significant. You may have heard that points may be deducted on your income taxes, but because tax regulations can be ever-changing, we urge you to consult with a tax professional before considering this in your calculations.
Another thing about taxes is that when your interest rate is reduced, naturally you'll also be reducing the paid interest amount that you'll be able to deduct on your taxes. This is another expense that some borrowers take into consideration. Call us at 8102292820 to help you do the math.
Ultimately, for most the amount of up-front costs to refinance are made up soon in savings each month. We'll help you determine what mortgage program is perfect for you, looking at your cash on hand, the likelihood of selling your residence in the near future, and what effect refinancing might have on your taxes. Call us at 8102292820 to get started.
Curious about refinancing your home? Give us a call at 8102292820.