Is Refinancing Worth the Cost?

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Ever heard the pearl of wisdom that says you should only refinance if the new interest rate is at least 2 points lower than your current one? Maybe that was good advice several years ago, but since refinance costs have been getting lower, it may be time to take a serious look. A refinance may be worth its cost several times over, considering the advantages that may come, in addition to a reduced interest rate.

Benefits

When you refinance, you may be able to reduce the interest rate and monthly payment amount, sometimes by a lot. You also might be given the option of pulling out some of the equity in your home by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. You may have the option to refinance into a shorter-term mortgage, giving you the ability to build up your home equity faster.

Expenses and Fees

All these benefits do cost something, though. You'll pay the same types of expenses and fees as you did with your present mortgage loan. Among these can be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Do the Math

Paying points can help you get a lower interest rate. Your savings on the life of the mortgage could be significant if you've paid up front about 3% of the new loan total. Please talk to a tax professional before acting on rumors that any paid points can be deducted on your taxes.

An additional expense that borrowers may take into account is that a reduced interest rate will reduce the interest amount you'll be able to deduct from your federal income taxes. Call us at (478) 746-2063 to help you do the math.

Most borrowers find that the savings per month quickly outweigh the initial expenses of a refinance. We'll help you find out which program is best for you, considering your cash on hand, how likely you are to sell your house in the next few years, and what effect refinancing will probably have on your taxes. Call us at (478) 746-2063 to get you started.

Want to know more about refinancing? Call us at (478) 746-2063.

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