When is Refinancing Worth it?
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It has been said that only in the case your new interest will be at least 2 points under your current rate, should you refinance your loan. Perhaps that was good advice a number of years ago, but since refinance costs have been getting lower, it could be a good time to take a serious look. A refinance may be worth its cost many times over, because of the advantages that can come, along with a reduced interest rate.
Benefits
When you refinance, you could be able to lower the interest rate and monthly mortgage payment , perhaps significantly. You also might have the option of pulling out some of the equity in your property by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. You could have the option to refinance to a shorter-term mortgage loan, enabling you to add to your home equity quicker.
Expenses and Fees
All of these benefits do cost something, though. You'll have the same types of fees as you did with your present home loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You might offer to pay discount points (prepaid interest) to attain a more favorable rate of interest. The amount you'll save on the life of the loan may be substantial if you have paid up front about three percent of the new loan balance. You may hear that points may be deducted on your income taxes, but as tax regulations can be difficult to keep up with, please consult with a tax professional before making decisions based on this.
One more cost that borrowers may consider is that a reduced interest rate will reduce the interest amount you will deduct on your federal income taxes. Call us at 800-800-6020 to help you do the math.
Ultimately, for most people the amount of up-front costs to refinance are made up very quickly in savings each month. We will work with you to figure out which mortgage program is the best fit for you, considering your cash on hand, the likelihood of selling your house in the next few years, and the effect refinancing could have on your taxes. Call us at 800-800-6020 to get started.
Curious about refinancing your home? Call us: 800-800-6020.