Is Refinancing Worth the Cost?

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Ever hear the pearl of wisdom that says you should only refinance if your new interest rate will be at least 2 points below your current rate? Maybe that was sound advice several years ago, but as refinance costs have been getting lower, it may be a good time to take a serious look. Refinancing has a number of benefits that often make it worth the up-front cost many times over.

Advantages

You might be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with a refinanced mortgage. You also may have the option of tapping into your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. You may have the option to refinance into a shorter-term mortgage, enabling you to add to your home equity faster.

The Cost

Of course, you'll have to pay for your the refinance process. You will have to pay the same sort of expenses and fees as you did with your present mortgage loan. Included in the list can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You could need to pay points (prepaid interest) to attain a more favorable interest rate. When you pay (on average) 3% of the mortgage loan amount up front, the savings for the term of the refinanced mortgage can be great. You might hear that points may be deducted on your income taxes, but because tax regulations can be ever-changing, please consult a tax professional before considering this in your calculations.

Speaking of taxes, if you lower your interest rate, it follows that you'll also be lowering the paid interest amount that you will be able to deduct from your federal income taxes. This is another expense that some borrowers consider. We can help you do the math! Call us at 623-340-0934.

Most borrowers find that the monthly savings quickly outweigh the initial expenses of refinancing. We'll help you find out which program is right for you, taking into account your cash on hand, how likely you are to sell your house in the next few years, and how refinancing could effect your taxes. Call us at 623-340-0934 to get started.

Curious about refinancing? Give us a call at 623-340-0934.

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