Is Refinancing Worth the Cost?
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Ever hear the pearl of wisdom that states you should only consider refinancing if your new interest rate is at least two points below your existing rate? Perhaps that was good advice several years ago, but since refinance costs have been getting lower, it could be a good time to look into it. Refinancing has a number of advantages that can make it worth the initial cost a few times over.
Benefits from Refinancing
You may be able to bring down your interest rate (sometimes by a lot) and reduce your mortgage payment amount with your refinanced loan. Additionally, you may be given the option of pulling out some of your home equity by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. With reduced rates, you might also be able to build up home equity faster by switching to a shorter-term loan.
Fees and Expenses
Of course, you'll have to pay for the process of refinancing. With your refinance, you're paying for basically the same things you paid for during your current mortgage. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might offer to pay discount points (prepaid interest) to gain a lower rate of interest. The amount you'll save over the life of the loan might be significant if you've paid up front about 3% of the new loan total. We recommend that you consult with a tax professional before acting on hear-say that any points paid can be deducted on your taxes.
One more cost that a borrower might consider is that a lower rate of interest will reduce the interest amount you will be able to deduct from your federal income taxes. We can help you do the math! Call us at 719-425-2226.
Most borrowers find that the monthly savings outweigh the initial cost of a refinance. We can help you explore your options, considering the effect a refinance could have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at 719-425-2226 to get you started.
Curious about refinancing your home? Call us at 719-425-2226.