Is Refinancing Worth the Cost?
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Have you ever heard the old rule of thumb that says you should only refinance if the new interest rate will be at least 2 points below your current rate? Maybe several years ago that was sage advice, but as refinance costs have been falling recently, it could be a good time to look into it. A refinance can be worth its cost several times over, factoring in the benefits that it brings, in addition to a lower interest rate.
Advantages of Refinancing
You might be able to lower your interest rate (sometimes by a lot) and reduce your monthly mortgage payment amount with your refinanced mortgage. Additionally, you may be given the option of pulling out some of the equity in your property by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. You could have the option to refinance into a shorter-term mortgage loan, giving you the ability to build up your home equity faster.
Expenses and Fees
All of these benefits do cost something, though. When you refinance, you are paying for basically the same things you paid for when you got your current mortgage loan. Among these might be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
Paying points can get you a lower interest rate. If you pay (on average) three percent of the mortgage loan amount up front, your savings for the life of the new mortgage loan can be substantial. Please talk to a tax professional before acting on rumors that any paid points may be deducted on your taxes.
Another thing about taxes is that when you bring down your interest rate, it follows that you'll also be reducing the paid interest amount that you may deduct on your taxes. This is another expense that borrowers take into account. We can help you do the math! Call us at 623-340-0934.
Ultimately, for most the total of up-front costs to refinance will be made up soon in savings each month. We can help you explore your options, considering the effect a refinance could have on your taxes, if 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 you started.
Want to know more about refinancing your home? Call us at 623-340-0934.