Is Refinancing Worth the Cost?

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Ever heard the pearl of wisdom that says you should only consider refinancing if your new interest rate is at least two points below your existing one? Perhaps that was good advice a number of years ago, but since refinance costs have been falling recently, it could be time to take a serious look. A refinanced loan is often worth its cost many times over, because of the benefits that come, as well as a lower interest rate.

Advantages

When you refinance, you may have the ability to lower the interest rate and monthly mortgage payment amount, perhaps by a lot. Additionally, you might have the option of tapping into your home equity by "cashing out" some money to remodel your home, consolidate debt, or take your family on a vacation. You may be able to refinance to a shorter-term mortgage loan, giving you the ability to build up your home equity quicker.

Expenses and Fees

All these benefits do come with some expense, though. You'll be charged the same sort of fees as you did with your current mortgage loan. Included in your costs might be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.

Do the Math

You might look into paying points to receive a reduced interest rate. When you pay (on average) three percent of the mortgage loan amount up front, the savings for the term of the refinanced loan can be significant. You may be told that points may be deducted on your income taxes, but since tax regulations are ever-changing, we urge you to speak with a tax professional before depending on this.

Another expense that borrowers might take into account is that a lower interest rate will lower the interest amount you will be able to deduct on your taxes. Call us at (334) 285-8850 to help you do the math.

Ultimately, for most people the amount of up-front costs to refinance are paid back very quickly in savings each month. We can help you explore what your options are, 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 cash on hand. Call us at (334) 285-8850 to get started.

Want to know more about refinancing? Call us at (334) 285-8850.

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