Is Refinancing Worth the Cost?
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Ever hear the old rule of thumb that states you should only refinance if your new interest rate is at least 2 points below your existing rate? Perhaps several years ago that was good advice, but since refinance costs have been getting lower, it could be time to take a serious look. A refinanced mortgage can be worth its cost several times over, because of the advantages that it brings, as well as a lower interest rate.
Benefits from Refinancing
You may be able to bring down your interest rate (sometimes significantly) and reduce your monthly mortgage payment amount with a refinanced mortgage loan. You may also have the option to "cash out" some of the built-up equity in your home, that you are able use to take care of higher interest debts, improve your home, or take a vacation. With reduced 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 advantages do come with some expense, though. With your refinance, you're paying for most of the same things you paid for when you got your original mortgage loan. Among these can be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Doing the Math
You could offer to pay discount points (prepaid interest) to attain a lower interest rate. Your savings over the life of the loan might be substantial if you have paid up front about three percent of the new loan balance. You may hear that these points can be deducted on your income taxes, but as tax regulations can be ever-changing, please consult a tax professional before depending on this.
One more cost that borrowers might take into account is that a reduced interest rate will reduce the interest amount you will be able to deduct from your federal income taxes. Call us at 972-932-9083 to help you do the math.
In the end, for most people the total of initial costs to refinance are paid back very quickly in savings each month. We can help you figure out what your options are, considering the effect a refinance may have on your taxes, how likely you might be to sell in the next couple of years, and your money on hand. Call us at 972-932-9083 to get started.
Want to know more about refinancing? Call us: 972-932-9083.