Is Refinancing Worth the Cost?
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Some have said that only if your new interest is at least two points lower, should you refinance your loan. That could have been valid years ago, but with refinancing dropping in cost recently, it's a good time to consider a new mortgage! Refinancing has a variety of advantages that can make it worth the initial expenditure a few times over.
When you refinance, you may be able to lower your interest rate and monthly payment , perhaps by a lot. You might also have the option to "cash out" a portion of the built-up equity in your home, that you may use to take care of higher interest debts, make home improvements, or take a vacation. With lower interest rates, you may also be able to build up home equity faster by moving to a shorter term mortgage loan.
All of these benefits do come with some expense, though. You will have to pay the same sort of fees as with your existing home loan. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
You might need to pay points (prepaid interest) to get a lower interest rate. When you pay (on average) three percent of the mortgage loan amount up front, the savings for the life of the refinanced loan can be great. You might be told that the points can be tax deductible, but since tax regulations are ever-changing, we urge you to speak with a tax professional before considering this in your calculations.
An additional expense 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 (281) 778-0805 to help you do the math.
Most people find that the savings each month outweigh the initial cost of a refinance. We can help you figure out your options, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at (281) 778-0805 to get you started.
Want to know more about refinancing your home? Give us a call: (281) 778-0805.