Is Refinancing Worth the Cost?

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It has been said that only if your new interest will be at least two points below your current rate, should you refinance your mortgage. Maybe several years ago that was good advice, but since refinance costs have been falling recently, it could be time to look into it. A refinanced loan can be worth its cost several times over, considering the benefits that it brings, in addition to a lower interest rate.

Advantages of Refinancing

You may be able to lower your interest rate (sometimes substantially) and reduce your monthly mortgage payment amount with your refinanced loan. You may also have the ability to "cash out" some of your equity, that you may use to take care of higher interest debts, make home improvements, or plan a vacation. You may have the option to refinance to a shorter-term mortgage, giving you the ability to build your home equity faster.

The Cost

All these advantages do come with some expense, though. With your refinance, you are paying for many of the same things you paid for during your existing mortgage loan. These can include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Doing the Math

You might think about paying points to reduce your interest rate. When you pay (on average) 3% of the mortgage loan amount at the start, your savings for the life of the refinanced loan can be great. You may be told that points can be tax deductible, but as tax regulations are ever-changing, we urge you to speak with your tax professional before making any decisions based on this.

An additional cost that borrowers may take into account is that a reduced rate of interest will reduce the interest amount you will be able to deduct from your taxes. Call us at 954.920.9799 to help you do the math.

In the end, for most people the amount of up-front costs to refinance will be made up soon in savings each month. We'll help you figure out which loan program is best for you, looking at your cash on hand, the likelihood of selling your residence in the near future, and how refinancing could effect your taxes. Call us at 954.920.9799 to get you started.

Curious about refinancing your home? Give us a call: 954.920.9799.

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