Is Refinancing Worth the Cost?
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Some have said that only when your new interest will be at least 2 points under your current rate, should you refinance your mortgage. That might have been valid a while back, but with refinancing dropping in cost over the last few years, it is a good time to explore the options of a new loan! A refinanced loan can be worth its cost many times over, factoring in the advantages that come, as well as a lower interest rate.
You may be able to lower your interest rate (sometimes significantly) and make smaller monthly payments with a refinanced mortgage loan. You also could have the option of pulling out some of the equity in your house by "cashing out" some funds to fix up your home, consolidate debt, or plan a special vacation. You may be able to refinance into a shorter-term mortgage loan, giving you the ability to build up your equity quicker.
Fees and Expenses
All these advantages do cost something, though. You will pay the same sort of fees as you did with your current mortgage loan. Included in your costs may be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Do the Math
You might offer to pay points (prepaid interest) to gain a better rate of interest. If you pay (on average) 3% of the mortgage loan amount up front, the savings for the life of the new loan can be substantial. You might have heard that the points may be deducted on your income taxes, but because tax regulations are difficult to keep up with, we urge you to consult with your tax professional before depending on this.
Speaking of taxes, once your interest rate is lowered, of course you'll also be lowering the interest amount that you'll be able to deduct from your federal income taxes. This is one more cost that borrowers take into account. Call us at (941) 366-5800 to help you do the math.
Most borrowers find that the savings per month quickly outweigh the up-front expenses of a refinance. We'll work with you to figure out which program is right for you, considering your cash on hand, how likely you are to sell your home in the next few years, and how refinancing will effect your taxes. Call us at (941) 366-5800 to get started.
Want to know more about refinancing your home? Give us a call at (941) 366-5800.