Is Refinancing Worth the Cost?

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Ever hear the pearl of wisdom that says you should only refinance if the new interest rate is at least 2 points under your current one? That might have been good advice a while back, but as refinancing has been costing less over the last few years, it is a good time to think about a new mortgage loan! Refinancing has various benefits that often make it worth the up-front cost a few times over.

Advantages of Refinancing

You might be able to lower your interest rate (sometimes significantly) and reduce your monthly payment amount with your refinanced loan. You also might have the option of tapping into the equity in your home by "cashing out" a sum of money to remodel 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 build your home equity faster.

The Cost

As you probably know, you'll have some fees and expenses during your process of refinancing. When you refinance, you're paying for basically the same things you were charged for when you got your current mortgage loan. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

Do the Math

You could offer to pay points (prepaid interest) to gain a better rate of interest. Your savings over the life of the mortgage loan might be significant if you have paid up front about three percent of the new loan total. You might hear that these points may be tax deductible, but as tax regulations are ever-changing, please speak with a tax professional before making any decisions based on this.

One more expense that borrowers might consider is that a lower rate of interest will reduce the interest amount you will be able to deduct on your taxes. Call us at 623-340-0934 to help you do the math.

Most borrowers find that the savings each month quickly outweigh the initial expenses of a refinance. We can help you figure out your options, considering the effect a refinance could have on your taxes, whether you are likely to sell your home in the next couple of years, and your available cash. Call us at 623-340-0934 to get started.

Want to know more about refinancing your home? Give us a call at 623-340-0934.

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