When is Refinancing Worth it?

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Ever hear the old rule of thumb that states you should only refinance if your new interest rate will be at least two points under your existing rate? Maybe several years ago that was wise advice, but since refinance costs have been falling recently, it could be a good time to take a serious look. Refinancing your mortgage has a number of benefits that often make it worth the initial expenditure several times over.

Benefits

You may be able to lower your interest rate (sometimes significantly) and make smaller mortgage payments with a refinanced mortgage loan. You might also be able to "cash out" some of the built-up equity in your home, which you can use to take care of higher interest debts, add on to your home, or take a vacation. You may have the option to refinance to a shorter-term mortgage loan, enabling you to add to your home equity faster.

The Cost

All of these benefits do come with some expense, though. When you refinance, you're paying for basically the same things you were charged for at the time you got your current mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You might offer to pay points (prepaid interest) to get a better rate of interest. Your savings on the life of the loan might be significant if you have paid up front about 3% of the new loan total. Please consult with a tax professional before acting on advice that any points paid may be deducted on your taxes.

An additional cost that borrowers may take into account is that a reduced rate of interest will lower the interest amount you will deduct from your federal income taxes. We can help you do the math! Call us at 3217777277.

Most people find that the savings each month quickly balance out the initial expenses of a refinance. We will work with you to find out which 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 what effect refinancing might have on your taxes. Call us at 3217777277 to get you started.

Curious about refinancing your home? Call us at 3217777277.

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