Is Refinancing Worth the Cost?
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Ever heard the old rule of thumb that states you should only refinance if the new interest rate is at least two points lower than your existing one? Perhaps several years ago that was sage advice, but as refinance costs have been falling recently, it could be time to take a serious look. Refinancing has a number of advantages that can make it worth the up-front cost a few times over.
Advantages of Refinancing
When you refinance, you might have the ability to reduce the interest rate and mortgage payment , perhaps by a lot. You also could be given the option of tapping into your home equity by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. With reduced rates, you may also get the chance to build your home equity more quickly by switching to a shorter term mortgage.
Fees and Expenses
As you probably know, you'll have to pay for the process of refinancing. When you refinance, you're paying for basically the same things you were charged for at the time you got your existing mortgage. Among these can be settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.
Doing the Math
Paying points can help you attain a better interest rate. Your savings on the life of the mortgage loan might be substantial if you've paid up front about 3% of the new loan balance. You might have heard that these points can be tax deductible, but since tax regulations can be ever-changing, we urge you to consult with your tax professional before considering this in your calculations.
An additional cost that borrowers may take into account is that a lower interest rate will lower the interest amount you'll deduct from your taxes. We can help you do the math! Call us at (281) 778-0805.
Most borrowers find that the savings per month quickly balance out the up-front expenses of refinancing. We will work with you to determine what mortgage loan program is best for you, taking into account your cash on hand, how likely you are to sell your residence in the next few years, and the effect refinancing could have on your taxes. Call us at (281) 778-0805 to get started.
Want to know more about refinancing your home? Call us at (281) 778-0805.