Is Refinancing Worth the Cost?
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Some have said that only in the case your new interest is at least two points under your current rate, should you refinance your mortgage. That might have been valid years ago, but with refinancing dropping in cost in recent years, it's a good time to consider a new mortgage loan! A refinance may be worth its cost several times over, because of the benefits that it brings, as well as a lower interest rate.
Benefits from Refinancing
You could be able to lower your interest rate (sometimes by a lot) and reduce your mortgage payment amount with your refinanced loan. You also might be given the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also get the chance to build your home equity faster by moving to a shorter term loan.
Expenses and Fees
All these advantages do cost something, though. With your refinance, you're paying for most of the same things you were charged for during your current mortgage. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
Paying discount points can result in a lower interest rate. If you pay (on average) 3% of the loan amount at the start, your savings for the life of the new loan can be significant. You may have heard that these points can be deducted on your income taxes, but since tax regulations can be difficult to keep up with, please speak with your tax professional before considering this in your calculations.
Another thing about taxes is that when you reduce your interest rate, of course you'll also be reducing the paid interest amount that you'll be able to deduct on your taxes. This is another expense that borrowers take into account. Call us at 512-302-9410 to help you do the math.
All things considered, for most borrowers the amount of up-front costs to refinance are paid back soon in savings each month. We can help you figure out what your options are, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your available cash. Call us at 512-302-9410 to get started.
Curious about refinancing? Call us: 512-302-9410.