When is Refinancing Worth it?
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Have you ever heard the old rule of thumb 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 sage advice, but as refinance costs have been falling recently, it may be time to look into it. A refinance can be worth its cost several times over, because of the benefits that it brings, in addition to a lower interest rate.
Advantages of Refinancing
You may be able to lower your interest rate (sometimes by a lot) and make smaller mortgage payments with your refinanced mortgage loan. You might also be able to "cash out" a portion of the built-up equity in your home, which you can use to consolidate debts, improve your home, or take a vacation. You may be able to refinance to a shorter-term mortgage, enabling you to add to your home equity faster.
Of course, you'll have to pay for your the refinance process. With your refinance, you are paying for basically the same things you were charged for during your original mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might look into paying points to get a better interest rate. The money you will save on the life of the mortgage loan could be substantial if you've paid up front about 3% of the new loan total. We recommend that you talk to a tax professional before acting on rumors that these points paid may be deducted on your federal income taxes.
Another thing about taxes is that if you lower your interest rate, naturally you will also be lowering the paid interest amount that you'll be able to deduct on your federal income taxes. This is another cost that some borrowers take into consideration. Call us at (281) 778-0805 to help you do the math.
Most borrowers find that the savings per month quickly outweigh the initial cost of refinancing. We'll work with you to find out which program is ideal for you, looking at your cash on hand, how likely you are to sell your residence in the next few years, and how refinancing may effect your taxes. Call us at (281) 778-0805 to get started.
Curious about refinancing your home? Call us: (281) 778-0805.