Is Refinancing Worth the Cost?
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Some have said that only when your new interest is at least 2 points below your current rate, should you refinance your mortgage. Perhaps that was good advice a number of years ago, but since refinance costs have been falling recently, it could be a good time to look into it. Refinancing your loan has a number of benefits that often make it worth the up-front cost several times over.
Advantages of Refinancing
You could be able to bring down your interest rate (sometimes substantially) and have smaller mortgage payments with your refinanced mortgage loan. You could also be able to "cash out" some of the built-up equity in your residence, that you can use to take care of higher interest debt, add on to your home, or take a vacation. You might have the option to refinance to a shorter-term mortgage program, giving you the ability to build your equity quicker.
All of these advantages do cost something, though. When you refinance, you are paying for many of the same things you were charged for when you obtained your existing mortgage loan. Included in the list may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
Paying discount points can get you a better interest rate. The amount you'll save on the life of the mortgage may be significant if you have paid up front about 3% of the new loan total. We recommend that you talk to a tax professional before acting on advice that the points paid can be deducted on your taxes.
Another thing about taxes is that when your interest rate is reduced, it follows that you will also be lowering the interest amount that you may deduct from your federal income taxes. This is one more expense that some borrowers take into consideration. Call us at (334) 285-8850 to help you do the math.
All things considered, for most people the amount of initial costs to refinance will be paid back soon in monthly savings. We'll work with you to figure out which mortgage loan program is ideal for you, looking at your cash on hand, how likely you are to sell your house in the near future, and how refinancing could effect your taxes. Call us at (334) 285-8850 to get started.
Want to know more about refinancing? Call us at (334) 285-8850.