Is Refinancing Worth the Cost?
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Have you ever heard the pearl of wisdom that says you should only refinance if your new interest rate will be at least two points below your present rate? That could have been good advice years ago, but since refinancing has been costing less recently, it is a good time to consider a new loan! A refinance can be worth its cost many times over, because of the advantages that may come, along with a reduced interest rate.
Advantages of Refinancing
When you refinance, you could have the ability to reduce the interest rate and monthly mortgage payment amount, sometimes significantly. Additionally, you might have the option of pulling out some of the equity in your house by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also be able to build up home equity more quickly by changing to a shorter-term mortgage.
Expenses and Fees
Of course, you'll have some fees and expenses during the the refinance process. You will be charged the same kinds of fees as with your present mortgage. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Doing the Math
You might offer to pay discount points (prepaid interest) to gain a more favorable rate of interest. Your savings on the life of the loan may be substantial if you've paid up front about three percent of the new loan total. You might have heard that these points may be deducted on your income taxes, but since tax regulations can be ever-changing, please consult with your tax professional before considering this in your calculations.
Speaking of taxes, when you bring down your interest rate, it follows that you'll also be lowering the paid interest amount that you can deduct from your federal income taxes. This is another expense that some borrowers consider. Call us at (256) 734-6012 to help you do the math.
Most people find that the monthly savings quickly outweigh the up-front expenses of refinancing. We will help you determine what loan program is right for you, looking at your cash on hand, how likely you are to sell your residence in the near future, and how refinancing can effect your taxes. Call us at (256) 734-6012 to get you started.
Curious about refinancing? Give us a call: (256) 734-6012.