Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that states you should only refinance if your new interest rate is at least two points lower than your existing one? Maybe that was sound advice several years ago, but since refinance costs have been falling recently, it may be time to take a serious look. Refinancing has various benefits that can make it worth the initial expenditure several times over.

Benefits from Refinancing

You could be able to bring down your interest rate (sometimes significantly) and make smaller monthly payments with your refinanced mortgage. You could also have the ability to "cash out" a portion of your home equity, which you will be able use to take care of higher interest debts, improve your home, or take a vacation. With lower interest rates, you might also be able to build up home equity more quickly by changing to a shorter-term mortgage loan.

The Cost

All of these advantages do come with some expense, though. You'll have the same sort of expenses and fees as you did with your existing mortgage loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might need to pay points (prepaid interest) to get a better interest rate. The amount you'll save on the life of the mortgage may be substantial if you've paid up front about 3% of the new loan balance. Please talk to a tax professional before acting on hear-say that the points paid may be deducted on your federal income taxes.

An additional expense that borrowers might consider is that a lower interest rate will lower the interest amount you'll deduct from your taxes. We can help you do the math! Call us at 623-340-0934.

In the end, for most borrowers the total of initial costs to refinance are made up soon in savings each month. We'll work with you to find out which mortgage program is right for you, considering your cash on hand, how likely you are to sell your house in the next few years, and what effect refinancing may have on your taxes. Call us at 623-340-0934 to get started.

Want to know more about refinancing? Call us: 623-340-0934.

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