Is Refinancing Worth the Cost?
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Have you ever heard the old rule of thumb that states you should only refinance if your new interest rate will be at least two points lower than your current one? Perhaps several years ago that was sage advice, but as refinance costs have been falling recently, it could be time to look into it. Refinancing has various advantages that can make it worth the up-front expenditure a few times over.
When you refinance, you may have the ability to lower your interest rate and monthly mortgage payment , sometimes considerably. You also might have the option of tapping into the equity in your house by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. With lower interest rates, you might also get the chance to build your home equity more quickly by switching to a shorter-term mortgage loan.
Expenses and Fees
All these advantages do cost something, though. You will have to pay the same types of expenses and fees as you did with your existing mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.
Do the Math
Paying points can get you a better interest rate. If you pay (on average) 3% of the mortgage loan amount at the start, your savings for the life of the new loan can be great. You might have heard that points can be deducted on your income taxes, but since tax regulations are difficult to keep up with, we urge you to consult a tax professional before considering this in your calculations.
Another thing about taxes is that once you bring down your interest rate, of course you'll also be lowering the interest amount that you'll be able to deduct on your taxes. This is one more expense that some borrowers take into consideration. We can help you do the math! Call us at (972) 292-0448.
In the end, for most people the amount of initial costs to refinance will be made up very quickly in savings each month. We will help you figure out which mortgage program is the ideal fit for you, looking at your cash on hand, the likelihood of selling your home in the near future, and what effect refinancing could have on your taxes. Call us at (972) 292-0448 to get you started.
Curious about refinancing your home? Give us a call at (972) 292-0448.