Is Refinancing Worth the Cost?
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Ever heard the pearl of wisdom that says you should only consider refinancing if the new interest rate will be at least two points below your current one? That may have been accurate years ago, but with refinancing dropping in cost over the last few years, it's never the wrong time to consider a new mortgage! Refinancing has a number of advantages that can make it worth the up-front cost several times over.
Advantages
When you refinance, you may be able to reduce your interest rate and monthly mortgage payment , perhaps considerably. You could also have the option to "cash out" a portion of your home equity, which you may use to consolidate debt, make home improvements, or plan a vacation. With reduced interest rates, you might also get the chance to build your home equity more quickly by moving to a shorter-term mortgage.
The Cost
All of these advantages do come with some expense, though. You'll have the same types of fees as you did with your existing home loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might offer to pay points (prepaid interest) to attain a more favorable rate of interest. If you pay (on average) 3% of the loan amount up front, the savings for the life of the new mortgage can be significant. Please consult with a tax professional before acting on advice that any paid points can be deducted on your federal income taxes.
Another expense that a borrower might take into account is that a lower interest rate will lower the interest amount you will be able to deduct on your federal income taxes. We can help you do the math! Call us at 7205988300.
All things considered, for most the amount of up-front costs to refinance will be made up very quickly in savings each month. We can help you explore what your options are, considering the effect a refinance may have on your taxes, if you are likely to sell your home in the next couple of years, and your cash on hand. Call us at 7205988300 to get you started.
Want to know more about refinancing? Give us a call: 7205988300.