Is Refinancing Worth the Cost?
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Some have said that only when your new interest is at least two points under your current rate, should you refinance your loan. Maybe that was good advice a number of years ago, but as refinance costs have been falling recently, it could be time to take a serious look. Refinancing has various benefits that can make it worth the initial expenditure several times over.
Advantages of Refinancing
When you refinance, you could be able to lower your interest rate and mortgage payment , sometimes considerably. You may also have the ability to "cash out" some of the built-up equity in your residence, which you can use to consolidate debts, make home improvements, or plan a vacation. With lower interest rates, you might also be able to build up home equity faster by moving to a shorter term loan.
All these benefits do come with some expense, though. You will have to pay the same kinds of fees as you did with your present home loan. These may include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and so on.
Doing the Math
You might think about paying points to get a better interest rate. When you pay (on average) 3% of the loan amount initially, your savings for the term of the refinanced mortgage loan can be great. You may hear that the points can be tax deductible, but since tax regulations are difficult to keep up with, we urge you to speak with your tax professional before considering this in your calculations.
Another thing about taxes is that if you lower your interest rate, naturally you'll also be lowering the paid interest amount that you'll be able to deduct on your taxes. This is one more expense that some borrowers take into consideration. 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 near future, and your money on hand. Call us at (334) 285-8850 to get you started.
Curious about refinancing? Call us at (334) 285-8850.