Is Refinancing Worth the Cost?
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Ever hear the old rule of thumb that states you should only consider refinancing if the new interest rate will be at least two points below your existing one? Maybe several years ago that was good advice, but as refinance costs have been getting lower, it may be time to look into it. A refinanced mortgage is often worth its cost many times over, factoring in the advantages that can come, in addition to a lower interest rate.
You may be able to bring down your interest rate (sometimes significantly) and make smaller monthly payments with a refinanced loan. Additionally, you could have the option of tapping into the equity in your house by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. With lower rates, you may also get the chance to build up home equity faster by switching to a shorter term mortgage.
Expenses and Fees
As you probably know, you will have to pay for the process of refinancing. When you refinance, you're paying for a lot of the same things you were charged for during your original mortgage. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might consider paying points to reduce your interest rate. The amount you'll save on the life of the mortgage may be significant if you have paid up front about 3% of the new loan total. Please talk to a tax professional before acting on hear-say that any points paid may be deducted on your federal income taxes.
Another cost that borrowers might take into account is that a lower rate of interest will reduce the interest amount you'll be able to deduct from your taxes. Call us at 720-598-8300 to help you do the math.
All things considered, for most people the total of initial costs to refinance will be made up soon in savings each month. We can help you explore what your options are, considering the effect a refinance may have on your taxes, whether you are likely to sell your home in the next couple of years, and your cash on hand. Call us at 720-598-8300 to get you started.
Curious about refinancing your home? Call us at 720-598-8300.