Is Refinancing Worth the Cost?
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It has been said that only if your new interest is at least 2 points under your current rate, should you refinance your mortgage. Perhaps several years ago that was good advice, but as refinance costs have been falling recently, it may be a good time to take a serious look. Refinancing your loan has some advantages that can make it worth the up-front cost many times over.
You could be able to lower your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with your refinanced loan. You may also have the ability to "cash out" some of your home equity, that you are able use to take care of higher interest debt, make home improvements, or finance a vacation. You might be able to refinance to a shorter-term mortgage loan, giving you the ability to build up your home equity faster.
Fees and Expenses
As you probably expect, you will have some fees and expenses during your process of refinancing. You will have to pay the same sort of fees as you did with your present home loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might need to pay points (prepaid interest) to gain a better rate of interest. Your savings on the life of the mortgage loan might be significant if you have paid up front about 3% of the new loan total. You might be told that the 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 depending on this.
Speaking of taxes, if you bring down your interest rate, naturally you will also be lowering the interest amount that you'll be able to deduct from your taxes. This is another expense that some borrowers take into consideration. Call us at 754-202-4376 to help you do the math.
In the end, for most borrowers the amount of initial costs to refinance will be made up soon in monthly savings. We will help you determine what mortgage loan program is right for you, taking into account your cash on hand, the likelihood of selling your house in the next few years, and what effect refinancing will have on your taxes. Call us at 754-202-4376 to get started.
Want to know more about refinancing your home? Give us a call at 754-202-4376.