Is Refinancing Worth the Cost?
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Some have said that only when your new interest is at least 2 points lower, should you refinance your loan. That could have been true years ago, but since refinancing has been costing less in recent years, it is never the wrong time to think about a new mortgage! Refinancing has a variety of advantages that often make it worth the initial cost several times over.
You might be able to lower your interest rate (sometimes by a lot) and reduce your monthly payment amount with your refinanced mortgage. Additionally, you might have the option of pulling out some of the equity in your house by "cashing out" some money to renovate your home, consolidate debt, or take your family on a vacation. With reduced interest rates, you might also get the chance to build up home equity more quickly by switching to a shorter term loan.
Of course, you will have some fees and expenses during the the refinance process. You'll be charged the same types of expenses and fees as you did with your present home loan. Among these can be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You could offer to pay discount points (prepaid interest) to gain a lower interest rate. If you pay (on average) 3% of the mortgage loan amount at the start, the savings for the term of the new mortgage loan can be great. You might have heard that these points can be tax deductible, but as tax regulations can be ever-changing, we urge you to consult with your tax professional before making decisions based on this.
Another thing about taxes is that once your interest rate is reduced, of course you'll also be reducing the interest amount that you'll be able to deduct on your federal income taxes. This is another cost that borrowers take into consideration. We can help you do the math! Call us at 386-246-6322.
Most people find that the savings each month quickly balance out the initial cost of a refinance. We can help you figure out what your options are, considering the effect a refinance might 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 386-246-6322 to get started.
Curious about refinancing? Give us a call at 386-246-6322.