When is Refinancing Worth it?
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Ever hear the pearl of wisdom that states you should only consider refinancing if the new interest rate will be at least 2 points lower than your current one? Maybe several years ago that was good advice, but since refinance costs have been falling recently, it could be a good time to look into it. Refinancing has various benefits that often make it worth the up-front cost a few times over.
You may be able to lower your interest rate (sometimes significantly) and have smaller monthly payments with your refinanced loan. You could also be able to "cash out" a portion of the built-up equity in your residence, that you are able use to consolidate debt, improve your home, or finance a vacation. You could be able to refinance into a shorter-term mortgage, enabling you to build your home equity quicker.
Expenses and Fees
All of these benefits do cost something, though. You'll pay the same sort of fees as you did with your present home loan. These may include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Do the Math
You might investigate paying points to receive a better interest rate. Your savings on the life of the loan might be significant if you have paid up front about three percent of the new loan total. You may have heard that points may be deducted on your income taxes, but because tax regulations can be difficult to keep up with, please consult with your tax professional before making decisions based on this.
Speaking of taxes, when your interest rate is reduced, naturally you'll also be reducing the paid interest amount that you may deduct on your taxes. This is another expense that some borrowers take into consideration. Call us at (281) 778-0805 to help you do the math.
Ultimately, for most the amount of up-front costs to refinance are made up soon in savings each month. We'll help you find out which program is perfect for you, looking at your cash on hand, the likelihood of selling your house in the next few years, and the effect refinancing will have on your taxes. Call us at (281) 778-0805 to get you started.
Curious about refinancing your home? Call us: (281) 778-0805.