Is Refinancing Worth the Cost?

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Some have said that only when your new interest is at least two points below your current rate, should you refinance your mortgage. Perhaps several years ago that was good advice, but as refinance costs have been falling recently, it may be time to look into it. Refinancing your loan has a variety of benefits that often make it worth the up-front expenditure several times over.

Advantages of Refinancing

When you refinance, you could have the ability to lower the interest rate and monthly mortgage payment , sometimes significantly. You also might be given the option of pulling out some of your home equity by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. With lower rates, you might also get the chance to build your home equity more quickly by moving to a shorter-term loan.

The Cost

Of course, you will have to pay for the process of refinancing. When you refinance, you're paying for basically the same things you were charged for during your existing mortgage. 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 help you get a better interest rate. When you pay (on average) three percent of the mortgage loan amount at the start, the savings for the life of the refinanced mortgage can be substantial. You may be told that these points can be tax deductible, but as tax regulations are difficult to keep up with, please consult your tax professional before depending on this.

Speaking of taxes, when your interest rate is reduced, it follows that you will also be lowering the interest amount that you'll be able to deduct on your taxes. This is another expense that some borrowers take into consideration. Call us at (334) 285-8850 to help you do the math.

Most people find that the savings per month outweigh the initial cost of a refinance. We can help you figure out your options, considering the effect a refinance could have on your taxes, how likely you may be to sell in the near future, and your cash on hand. Call us at (334) 285-8850 to get started.

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

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