Is Refinancing Worth the Cost?
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It has been said that only when your new interest is at least 2 points lower, should you refinance your loan. That could have been valid a while back, but with refinancing dropping in cost recently, it is never the wrong time to consider a new loan! Refinancing your mortgage loan has a variety of advantages that will often make it worth the up-front expenditure several times over.
When you refinance, you could have the ability to reduce your interest rate and mortgage payment amount, perhaps by a lot. You could also have the option to "cash out" some of your home equity, which you can use to consolidate debts, add on to your home, or finance a vacation. You might be able to refinance into a shorter-term mortgage loan, enabling you to add to your equity faster.
Expenses and Fees
Of course, you will have to pay for your the refinance process. You will have the same kinds of fees as you did with your existing home loan. Included in the list might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
You could need to pay points (prepaid interest) to gain a lower interest rate. The amount you'll save on the life of the mortgage may be significant if you've paid up front about 3% of the new loan total. You may have heard that these points may be deducted on your income taxes, but as tax regulations are difficult to keep up with, we urge you to speak with your tax professional before considering this in your calculations.
Another expense that a borrower might take into account is that a lower rate of interest will reduce the interest amount you'll deduct on your taxes. Call us at 561-395-4264 to help you do the math.
In the end, for most borrowers the amount of initial costs to refinance are paid back very quickly in monthly savings. We can help you find out your options, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the near future, and your available cash. Call us at 561-395-4264 to get started.
Want to know more about refinancing your home? Give us a call: 561-395-4264.