When is Refinancing Worth it?

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Ever heard the old rule of thumb that says you should only consider refinancing if your new interest rate will be at least 2 points under your current rate? Perhaps several years ago that was good advice, but as refinance costs have been getting lower, it may be time to take a serious look. A refinanced mortgage is often worth its cost several times over, factoring in the advantages that it brings, in addition to a lower interest rate.

Advantages

When you refinance, you could be able to lower the interest rate and monthly payment amount, sometimes significantly. You could also have the option to "cash out" a portion of the built-up equity in your home, which you will be able use to consolidate debts, improve your home, or take a vacation. You might be able to refinance into a shorter-term mortgage program, enabling you to add to your home equity faster.

Fees and Expenses

All these benefits do cost something, though. You'll pay the same kinds of fees as with your existing home loan. Among these can be settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.

Do the Math

You might offer to pay discount points (prepaid interest) to get a better rate of interest. When you pay (on average) three percent of the loan amount at the start, your savings for the term of the new mortgage loan can be substantial. Please consult a tax professional before acting on rumors that these points paid may be deducted on your taxes.

Another thing about taxes is that if you bring down your interest rate, of course you'll also be reducing the paid interest amount that you'll be able to deduct from your taxes. This is one more expense that some borrowers take into account. Call us at (800) 974-0509 to help you do the math.

Most people find that the monthly savings balance out the initial cost of refinancing. We can help you figure out your options, 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 money on hand. Call us at (800) 974-0509 to get you started.

Curious about refinancing? Call us at (800) 974-0509.