When is Refinancing Worth it?

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Some have said that only in the case your new interest is at least 2 points under your current rate, should you refinance your mortgage. That may have been true years ago, but with refinancing dropping in cost over the last few years, it is a good time to consider a new loan! A refinanced mortgage may be worth its cost many times over, because of the advantages that may come, along with a lower interest rate.

Benefits

When you refinance, you might have the ability to lower the interest rate and monthly mortgage payment amount, perhaps considerably. Additionally, you may have the option of pulling out some of the equity in your home by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also be able to build up home equity more quickly by changing to a shorter term mortgage loan.

Fees and Expenses

As you probably expect, you'll have to pay for the the refinance process. When you refinance, you're paying for basically the same things you paid for during your current mortgage. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You could offer to pay points (prepaid interest) to get a more favorable interest rate. Your savings over the life of the mortgage might be significant if you have paid up front about 3% of the new loan total. Please talk to a tax professional before acting on rumors that the points paid can be deducted on your taxes.

Speaking of taxes, if you bring down your interest rate, naturally you will also be lowering the paid interest amount that you may deduct on your taxes. This is one more cost that borrowers consider. Call us at 719-425-2226 to help you do the math.

Most borrowers find that the savings per month balance out the initial cost of refinancing. We can help you find out your options, considering the effect a refinance might have on your taxes, whether you are likely to sell your home in the near future, and your available cash. Call us at 719-425-2226 to get you started.

Curious about refinancing? Give us a call at 719-425-2226.


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