Is Refinancing Worth the Cost?
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Ever heard the pearl of wisdom that states you should only consider refinancing if your new interest rate will be at least two points below your present rate? Maybe that was sound advice several years ago, but since refinance costs have been getting lower, it could be a good time to take a serious look. Refinancing has various advantages that will often make it worth the up-front cost a few times over.
Advantages of Refinancing
When you refinance, you could have the ability to lower your interest rate and monthly payment amount, sometimes significantly. You could also have the option to "cash out" a portion of your home equity, which you may use to consolidate debt, improve your home, or take a vacation. With reduced interest rates, you may also get the chance to build up home equity faster by moving to a shorter term mortgage loan.
Fees and Expenses
All of these benefits do come with some expense, though. You'll have the same sort of fees as you did with your current mortgage loan. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and so on.
Doing the Math
You could need to pay discount points (prepaid interest) to gain a lower rate of interest. Your savings over the life of the mortgage could be significant if you've paid up front about three percent of the new loan total. You may be told that the points may be tax deductible, but as tax regulations can be difficult to keep up with, please consult a tax professional before depending on this.
Speaking of taxes, when your interest rate is lowered, it follows that you will also be lowering the paid interest amount that you'll be able to deduct from your federal income taxes. This is one more expense that borrowers take into account. We can help you do the math! Call us at 305-800-3863.
In the end, for most people the amount of up-front costs to refinance are paid back soon in savings each month. We'll work with you to find out what loan program is perfect for you, taking into account your cash on hand, the likelihood of selling your house in the next few years, and how refinancing could effect your taxes. Call us at 305-800-3863 to get started.
Curious about refinancing your home? Give us a call at 305-800-3863.