Is Refinancing Worth the Cost?
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Some have said that only if your new interest will be at least two points lower, should you refinance your loan. That may have been accurate years ago, but with refinancing dropping in cost recently, it is a good time to think about a new loan! Refinancing has various advantages that often make it worth the initial cost many times over.
You could be able to bring down your interest rate (sometimes by a lot) and make smaller monthly payments with a refinanced mortgage. You could also have the option to "cash out" some of the built-up equity in your home, that you will be able use to consolidate debts, improve your home, or take a vacation. You might be able to refinance to a shorter-term mortgage loan, giving you the ability to add to your equity quicker.
All of these advantages do come with some expense, though. You'll have the same sort of fees as with your current home loan. These may include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.
Doing the Math
Paying discount points can help you get a lower interest rate. The amount you will save over the life of the mortgage might be substantial if you've paid up front about three percent of the new loan balance. You might have heard that these points may be deducted on your income taxes, but since tax regulations can be difficult to keep up with, we urge you to consult with a tax professional before making decisions based on this.
One more cost that a borrower might consider is that a lower interest rate will lower the interest amount you'll deduct on your taxes. Call us at 623-972-6432 to help you do the math.
Most borrowers find that the savings per month quickly balance out the initial cost of refinancing. We will work with you to determine what mortgage program is perfect for you, considering your cash on hand, the likelihood of selling your house in the next few years, and how refinancing could effect your taxes. Call us at 623-972-6432 to get started.
Want to know more about refinancing your home? Give us a call at 623-972-6432.