When is Refinancing Worth it?

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Ever hear the old rule of thumb that states you should only consider refinancing if your new interest rate is at least two points below your current one? That could have been sound advice years ago, but with refinancing dropping in cost in recent years, it is a good time to explore the options of a new mortgage loan! A refinanced mortgage is often worth its cost several times over, considering the benefits that it brings, along with a reduced interest rate.


You may be able to bring down your interest rate (sometimes substantially) and reduce your monthly payment amount with your refinanced mortgage loan. Additionally, you might have the option of tapping into your home equity by "cashing out" a sum of money to fix up your home, consolidate debt, or plan a special vacation. You may be able to refinance to a shorter-term mortgage, giving you the ability to build up your home equity faster.

The Cost

Of course, you'll have to pay for the the refinance process. You will pay the same kinds of expenses and fees as you did with your present home loan. Included in your costs can be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Do the Math

You could offer to pay discount points (prepaid interest) to gain a lower rate of interest. If you pay (on average) 3% of the mortgage loan amount up front, your savings for the term of the new mortgage can be significant. You may hear that these points can be tax deductible, but as tax regulations are ever-changing, please consult your tax professional before considering this in your calculations.

Another expense that borrowers may take into account is that a lower interest rate will reduce the interest amount you'll deduct from your taxes. We can help you do the math! Call us at (478) 746-2063.

Most people find that the savings each month balance out the up-front expenses of a refinance. We can help you explore your options, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at (478) 746-2063 to get you started.

Want to know more about refinancing? Give us a call: (478) 746-2063.

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