Is Refinancing Worth the Cost?
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It has been said that only when your new interest is at least 2 points under your current rate, should you refinance your loan. That may have been accurate years ago, but with refinancing dropping in cost recently, it's never the wrong time to consider a new mortgage! Refinancing has a variety of advantages that will often make it worth the up-front expenditure several times over.
Advantages of Refinancing
When you refinance, you could be able to reduce your interest rate and monthly payment , sometimes considerably. You could also have the option to "cash out" some of the built-up equity in your home, that you are able use to take care of higher interest debt, add on to your home, or finance a vacation. With lower interest rates, you might also be able to build up home equity faster by switching to a shorter term mortgage loan.
All of these advantages do cost something, though. You will be charged the same sort of expenses and fees as you did with your existing mortgage. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.
Doing the Math
Paying discount points can help you attain a better interest rate. If you pay (on average) 3% of the mortgage loan amount initially, your savings for the life of the new loan can be substantial. You may hear that these points can be tax deductible, but since tax regulations can be ever-changing, please consult a tax professional before considering this in your calculations.
Speaking of taxes, once you reduce your interest rate, it follows that you will also be reducing the interest amount that you can deduct on your federal income taxes. This is another cost that borrowers take into consideration. Call us at 512-302-9410 to help you do the math.
Most people find that the monthly savings balance out the initial expenses of refinancing. We can help you explore 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 cash on hand. Call us at 512-302-9410 to get you started.
Want to know more about refinancing your home? Call us at 512-302-9410.