Is Refinancing Worth the Cost?

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Some have said that only if your new interest is at least 2 points under your current rate, should you refinance your mortgage. Maybe several years ago that was good advice, but as refinance costs have been falling recently, it could be a good time to look into it. Refinancing has some benefits that will often make it worth the initial expenditure many times over.

Advantages of Refinancing

You may be able to lower your interest rate (sometimes by a lot) and have smaller monthly payments with your refinanced loan. You also might be given the option of tapping into your home equity by "cashing out" some funds to renovate your home, consolidate debt, or plan a special vacation. You may be able to refinance into a shorter-term mortgage loan, giving you the ability to add to your home equity quicker.

Expenses and Fees

All of these benefits do come with some expense, though. With your refinance, you are paying for basically the same things you paid for during your original mortgage. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might need to pay discount points (prepaid interest) to attain a better interest rate. When you pay (on average) 3% of the loan amount at the start, your savings for the term of the new mortgage loan can be great. Please consult a tax professional before acting on advice that these paid points may be deducted on your federal income taxes.

One more cost that borrowers may consider is that a lower interest rate will reduce the interest amount you'll be able to deduct on your taxes. We can help you do the math! Call us at (281) 778-0805.

In the end, for most people the amount of initial costs to refinance are paid back very quickly in monthly savings. We will help you determine what mortgage program is ideal for you, looking at your cash on hand, the likelihood of selling your house in the near future, and how refinancing will effect your taxes. Call us at (281) 778-0805 to get you started.

Want to know more about refinancing? Call us: (281) 778-0805.

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