Is Refinancing Worth the Cost?
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It has been said that only when your new interest will be at least 2 points lower, should you refinance your mortgage. That might have been valid a while back, but since refinancing has been costing less in recent years, it is a good time to explore the options of a new mortgage! Refinancing your loan has a variety of advantages that will often make it worth the up-front expenditure many times over.
Benefits from Refinancing
When you refinance, you may be able to reduce the interest rate and monthly mortgage payment amount, perhaps considerably. Additionally, you could have the option of tapping into your home equity by "cashing out" some funds to renovate your home, consolidate debt, or take your family on a vacation. You might have the option to refinance into a shorter-term mortgage program, giving you the ability to build up your equity quicker.
Expenses and Fees
As you probably know, you'll have to pay for your process of refinancing. With your refinance, you are paying for a lot of the same things you were charged for at the time you got your existing mortgage loan. These may include settlement costs, an appraisal, lender's title insurance, underwriting fees, and others.
Do the Math
You could need to pay discount points (prepaid interest) to gain a better interest rate. Your savings on the life of the mortgage loan could be significant if you have paid up front about three percent of the new loan balance. Please talk to a tax professional before acting on advice that these points paid may be deducted on your federal income taxes.
Another cost that borrowers may take into account is that a lower rate of interest will lower the interest amount you will be able to deduct on your taxes. Call us at 952 417 8481 to help you do the math.
Most borrowers find that the savings each month balance out the up-front cost of a refinance. We can help you explore your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your money on hand. Call us at 952 417 8481 to get you started.
Curious about refinancing? Give us a call at 952 417 8481.