Is Refinancing Worth the Cost?
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It has been said that only in the case your new interest will be at least two points below your current rate, should you refinance your mortgage. Maybe that was sound advice a number of years ago, but as refinance costs have been getting lower, it could be a good time to take a serious look. A refinance can be worth its cost several times over, considering the advantages that can come, along with a lower interest rate.
You may be able to lower your interest rate (sometimes significantly) and make smaller monthly payments with a refinanced mortgage loan. You might also be able to "cash out" some of your equity, which you may use to consolidate debt, improve your home, or take a vacation. You may have the option to refinance to a shorter-term mortgage loan, giving you the ability to build your home equity faster.
Fees and Expenses
All these benefits do cost something, though. You'll be charged the same types of expenses and fees as you did with your present mortgage. These can include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You could offer to pay points (prepaid interest) to gain a more favorable rate of interest. When you pay (on average) three percent of the loan amount initially, your savings for the term of the refinanced mortgage can be substantial. You might be told that these points may be deducted on your income taxes, but as tax regulations can be ever-changing, we urge you to consult with a tax professional before depending on this.
Speaking of taxes, once you reduce your interest rate, it follows that you'll also be reducing the interest amount that you'll be able to deduct from your federal income taxes. This is another expense that some borrowers take into consideration. Call us at (281) 778-0805 to help you do the math.
In the end, for most people the total of initial costs to refinance are made up soon in monthly savings. We'll work with you to figure out which loan program is perfect for you, looking at your cash on hand, the likelihood of selling your residence in the next few years, and what effect refinancing will probably have on your taxes. Call us at (281) 778-0805 to get you started.
Curious about refinancing your home? Call us: (281) 778-0805.